NVE's (NASDAQ:NVEC) Dividend Will Be $1.00

NVE Corporation's (NASDAQ:NVEC) investors are due to receive a payment of $1.00 per share on 31st of May. This means the annual payment is 5.5% of the current stock price, which is above the average for the industry.

View our latest analysis for NVE

NVE Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, the company was paying out 113% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Over the next year, EPS could expand by 3.4% 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 110%, which probably can't continue without starting to put some pressure on the balance sheet.

NVE Doesn't Have A Long Payment History

It is great to see that NVE has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The most recent annual payment of $4.00 is about the same as the annual payment 9 years ago. 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.

NVE May Find It Hard To Grow The Dividend

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 3.4% per year. The earnings growth is anaemic, and the company is paying out 113% of its profit. This gives limited room for the company to raise the dividend in the future.

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 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for NVE that investors should take into consideration. Is NVE not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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