NVE (NASDAQ:NVEC) Is Due To Pay A Dividend Of $1.00

The board of NVE Corporation (NASDAQ:NVEC) has announced that it will pay a dividend of $1.00 per share on the 30th of November. The dividend yield will be 5.9% based on this payment which is still above the industry average.

View our latest analysis for NVE

NVE's Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, NVE's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 101% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

EPS is set to grow by 6.6% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 85%, which is on the higher side, but certainly still feasible.

NVE Doesn't Have A Long Payment History

NVE's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The most recent annual payment of $4.00 is about the same as the annual payment 8 years ago. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

We Could See NVE's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. NVE has impressed us by growing EPS at 6.6% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

NVE's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think NVE is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for NVE that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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