NVE (NASDAQ:NVEC) Has Announced A Dividend Of US$1.00
The board of NVE Corporation (NASDAQ:NVEC) has announced that it will pay a dividend on the 30th of November, with investors receiving US$1.00 per share. Based on this payment, the dividend yield on the company's stock will be 5.9%, which is an attractive boost to shareholder returns.
View our latest analysis for NVE
NVE Doesn't Earn Enough To Cover Its Payments
A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Earnings per share could rise by 4.2% 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 132%, which probably can't continue without starting to put some pressure on the balance sheet.
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 US$4.00 is about the same as the first annual payment 6 years ago. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.
NVE May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, NVE has only grown its earnings per share at 4.2% per annum over the past five years. The earnings growth is anaemic, and the company is paying out 135% of its profit. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for NVE that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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.
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