NVE (NASDAQ:NVEC) Will Pay A Dividend Of US$1.00

NVE Corporation (NASDAQ:NVEC) has announced that it will pay a dividend of US$1.00 per share on the 28th of February. This means the annual payment is 6.6% of the current stock price, which is above the average for the industry.

Check out our latest analysis for NVE

NVE Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS could expand by 2.0% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, we think the payout ratio could reach 139%, which probably can't continue without starting to put some pressure on the balance sheet.

NVE Is Still Building Its Track Record

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. 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.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings per share has been crawling upwards at 2.0% per year. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. 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 track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for NVE (of which 1 is significant!) you should know about. We have also put together a list of global stocks with a solid dividend.

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