Napier Port Holdings (NZSE:NPH) Has Announced That It Will Be Increasing Its Dividend To NZ$0.0941

Napier Port Holdings Limited's (NZSE:NPH) dividend will be increasing from last year's payment of the same period to NZ$0.0941 on 16th of December. This makes the dividend yield 2.5%, which is above the industry average.

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Napier Port Holdings' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Napier Port Holdings was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 45.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.

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Napier Port Holdings' Dividend Has Lacked Consistency

Napier Port Holdings has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from NZ$0.025 total annually to NZ$0.09. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Napier Port Holdings has been growing its earnings per share at 7.0% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Now, if you want to look closer, it would be worth checking out our free research on Napier Port Holdings management tenure, salary, and performance. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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