NGL Fine-Chem (NSE:NGLFINE) Has Affirmed Its Dividend Of ₹1.75

NGL Fine-Chem Limited's (NSE:NGLFINE) investors are due to receive a payment of ₹1.75 per share on 18th of September. The dividend yield is 0.1% based on this payment, which is a little bit low compared to the other companies in the industry.

Our free stock report includes 4 warning signs investors should be aware of before investing in NGL Fine-Chem. Read for free now.

NGL Fine-Chem's Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. NGL Fine-Chem is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 20.4% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 4.2%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for NGL Fine-Chem

NGL Fine-Chem Doesn't Have A Long Payment History

It is great to see that NGL Fine-Chem has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The last annual payment of ₹1.75 was flat on the annual payment from6 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that NGL Fine-Chem has been growing its earnings per share at 20% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about NGL Fine-Chem's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, NGL Fine-Chem has 4 warning signs (and 2 which are a bit concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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