NL Industries (NYSE:NL) Will Pay A Dividend Of $0.07

NL Industries, Inc.'s (NYSE:NL) investors are due to receive a payment of $0.07 per share on 23rd of March. This means the annual payment is 3.9% of the current stock price, which is above the average for the industry.

Check out our latest analysis for NL Industries

NL Industries' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, based ont he last payment, NL Industries was earning enough to cover the dividend pretty comfortably. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

Looking forward, EPS could fall by 6.5% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 60%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.50 in 2013 to the most recent total annual payment of $0.28. The dividend has shrunk at around 5.6% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's not great to see that NL Industries' earnings per share has fallen at approximately 6.5% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On NL Industries' 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. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments NL Industries has been making. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've identified 2 warning signs for NL Industries (1 doesn't sit too well with us!) that you should be aware of before investing. 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.