Nippon Life India Asset Management (NSE:NAM-INDIA) Has Announced A Dividend Of ₹10.00

Nippon Life India Asset Management Limited (NSE:NAM-INDIA) has announced that it will pay a dividend of ₹10.00 per share on the 17th of August. The dividend yield of 2.3% is still a nice boost to shareholder returns, despite the cut.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Nippon Life India Asset Management's stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Nippon Life India Asset Management's Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Nippon Life India Asset Management's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 174% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 46.8%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 71% which would be quite comfortable going to take the dividend forward.

Check out our latest analysis for Nippon Life India Asset Management

Nippon Life India Asset Management's Dividend Has Lacked Consistency

It's comforting to see that Nippon Life India Asset Management has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the dividend has gone from ₹5.00 total annually to ₹18.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. Nippon Life India Asset Management has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Nippon Life India Asset Management's Dividend Might Lack Growth

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Nippon Life India Asset Management has grown earnings per share at 24% per year over the past five years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Nippon Life India Asset Management is not retaining those earnings to reinvest in growth.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Nippon Life India Asset Management (1 is potentially serious!) that you should be aware of before investing. Is Nippon Life India Asset Management not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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