Nucleus Software Exports (NSE:NUCLEUS) Will Pay A Dividend Of ₹12.50

Nucleus Software Exports Limited (NSE:NUCLEUS) has announced that it will pay a dividend of ₹12.50 per share on the 1st of January. This means the dividend yield will be fairly typical at 1.1%.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Nucleus Software Exports' stock price has increased by 46% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Nucleus Software Exports' Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Nucleus Software Exports' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 40.4%. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Nucleus Software Exports

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹3.00 in 2015, and the most recent fiscal year payment was ₹12.50. This means that it has been growing its distributions at 15% per annum over that time. Nucleus Software Exports has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Nucleus Software Exports has impressed us by growing EPS at 15% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Nucleus Software Exports' Dividend

Overall, we like to see the dividend staying consistent, and we think Nucleus Software Exports might even raise payments in the future. 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. All in all, this checks a lot of the boxes we look for when choosing an 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. Taking the debate a bit further, we've identified 2 warning signs for Nucleus Software Exports that investors need to be conscious of moving forward. 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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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.