Turners Automotive Group (NZSE:TRA) Is Due To Pay A Dividend Of NZ$0.071
The board of Turners Automotive Group Limited (NZSE:TRA) has announced that it will pay a dividend on the 28th of July, with investors receiving NZ$0.071 per share. Based on this payment, the dividend yield on the company’s stock will be 5.7%, which is an attractive boost to shareholder returns.
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 Turners Automotive Group’s stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
Check out our latest analysis for Turners Automotive Group
Turners Automotive Group’s Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn’t matter if the payment isn’t sustainable. Based on the last dividend, Turners Automotive Group is earning enough to cover the payment, but the it makes up 765% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.
Over the next year, EPS could expand by 4.9% if the company continues along the path it has been on recently. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 77%, which is on the higher side, but certainly still feasible.
Turners Automotive Group’s Dividend Has Lacked Consistency
Turners Automotive Group has been paying dividends for a while, but the track record isn’t stellar. If the company cuts once, it definitely isn’t argument against the possibility of it cutting in the future. The first annual payment during the last 7 years was NZ$0.05 in 2014, and the most recent fiscal year payment was NZ$0.20. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
Turners Automotive Group May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it’s even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been crawling upwards at 4.9% per year. Turners Automotive Group is struggling to find viable investments, so it is returning more to shareholders. This isn’t bad in itself, but unless earnings growth pick up we wouldn’t expect dividends to grow either.
Our Thoughts On Turners Automotive Group’s Dividend
Overall, we don’t think this company makes a great dividend stock, even though the dividend wasn’t cut this year. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.
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. Just as an example, we’ve come across 2 warning signs for Turners Automotive Group you should be aware of, and 1 of them shouldn’t be ignored. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
This article by Simply Wall St is general in nature. 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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