Nesco (NSE:NESCO) Has Announced A Dividend Of ₹3.00

The board of Nesco Limited (NSE:NESCO) has announced that it will pay a dividend of ₹3.00 per share on the 7th of September. This means the annual payment will be 0.5% of the current stock price, which is lower than the industry average.

View our latest analysis for Nesco

Nesco's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Nesco's dividend was only 11% of earnings, however it was paying out 146% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 100.4% over the next year. If the dividend continues on this path, the payout ratio could be 6.1% by next year, which we think can be pretty sustainable going forward.

Nesco Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was ₹0.60, compared to the most recent full-year payment of ₹3.00. This means that it has been growing its distributions at 17% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings have grown at around 2.2% a year for the past five years, which isn't massive but still better than seeing them shrink. If Nesco is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Nesco's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Nesco is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for Nesco that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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