NACCO Industries (NYSE:NC) Will Pay A Larger Dividend Than Last Year At $0.2175

NACCO Industries, Inc. (NYSE:NC) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of June to $0.2175. Despite this raise, the dividend yield of 2.6% is only a modest boost to shareholder returns.

View our latest analysis for NACCO Industries

NACCO Industries' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, NACCO Industries' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 16.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 7.7%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 $2.19 in 2013 to the most recent total annual payment of $0.87. The dividend has shrunk at around 8.8% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. NACCO Industries has seen EPS rising for the last five years, at 17% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for NACCO Industries' prospects of growing its dividend payments in the future.

NACCO Industries Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for NACCO Industries 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.