Tamil Nadu Newsprint and Papers' (NSE:TNPL) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Tamil Nadu Newsprint and Papers Limited (NSE:TNPL) has announced that it will be increasing its dividend by 25% on the 25th of October to ₹5.00, up from last year's comparable payment of ₹4.00. This will take the annual payment to 1.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Tamil Nadu Newsprint and Papers

Tamil Nadu Newsprint and Papers' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Tamil Nadu Newsprint and Papers' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 18.8% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 7.2% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was ₹5.00, compared to the most recent full-year payment of ₹4.00. This works out to be a decline of approximately 2.2% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Tamil Nadu Newsprint and Papers has grown earnings per share at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Tamil Nadu Newsprint and Papers Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Tamil Nadu Newsprint and Papers that investors should take into consideration. Is Tamil Nadu Newsprint and Papers not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.