NVE (NASDAQ:NVEC) Has Affirmed Its Dividend Of US$1.00

NVE Corporation's (NASDAQ:NVEC) investors are due to receive a payment of US$1.00 per share on 31st of May. Based on this payment, the dividend yield on the company's stock will be 8.5%, which is an attractive boost to shareholder returns.

View our latest analysis for NVE

NVE Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 133% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share could rise by 2.3% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 130%, which probably can't continue without starting to put some pressure on the balance sheet.

NVE Is Still Building Its Track Record

It is great to see that NVE has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. There hasn't been much of a change in the dividend over the last 7. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

NVE May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 2.3% per year. So the company has struggled to grow its EPS yet it's still paying out 133% of its earnings. This gives limited room for the company to raise the dividend in the future.

NVE's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about NVE's payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for NVE you should be aware of, and 2 of them are a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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