NACCO Industries (NYSE:NC) Has Affirmed Its Dividend Of US$0.20

By
Simply Wall St
Published
November 13, 2021
NYSE:NC
Source: Shutterstock

NACCO Industries, Inc.'s (NYSE:NC) investors are due to receive a payment of US$0.20 per share on 15th of December. The dividend yield is 2.3% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for NACCO Industries

NACCO Industries' Earnings Easily Cover the Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, NACCO Industries was paying only paying out a fraction of earnings, but the payment was a massive 232% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 5.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NYSE:NC Historic Dividend November 14th 2021

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. Since 2011, the dividend has gone from US$2.09 to US$0.79. The dividend has shrunk at around 9.3% 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.

The Dividend Has Growth Potential

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. NACCO Industries has seen EPS rising for the last five years, at 5.3% per annum. NACCO Industries definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

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 NACCO Industries is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 picked out 2 warning signs for NACCO Industries that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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