Peter Warren Automotive Holdings' (ASX:PWR) Dividend Will Be Reduced To A$0.11

Peter Warren Automotive Holdings Limited's (ASX:PWR) dividend is being reduced from last year's payment covering the same period to A$0.11 on the 3rd of October. The yield is still above the industry average at 8.5%.

Check out our latest analysis for Peter Warren Automotive Holdings

Peter Warren Automotive Holdings' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Peter Warren Automotive Holdings' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to fall by 10.9%. If recent patterns in the dividend continue, we could see the payout ratio reaching 75% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Peter Warren Automotive Holdings Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

We Could See Peter Warren Automotive Holdings' Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Peter Warren Automotive Holdings has been growing its earnings per share at 6.9% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Our Thoughts On Peter Warren Automotive Holdings' Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Peter Warren Automotive Holdings (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.