NL Industries (NYSE:NL) Will Pay A Larger Dividend Than Last Year At US$0.07
NL Industries, Inc. (NYSE:NL) will increase its dividend on the 24th of March to US$0.07, which is 17% higher than last year. This will take the annual payment from 3.5% to 3.6% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for NL Industries
NL Industries' Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, NL Industries' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS could expand by 219.8% if trends from the past few years continue. Assuming the dividend continues along recent trends, we think the payout ratio will be 11%, which makes us pretty comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from US$0.50 in 2012 to the most recent annual payment of US$0.24. This works out to be a decline of approximately 7.1% per year over that time. 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
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. NL Industries has seen EPS rising for the last five years, at 220% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
NL Industries Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that NL Industries is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for NL Industries you should be aware of, and 1 of them is concerning. Is NL Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
