Automotive Axles' (NSE:AUTOAXLES) Dividend Is Being Reduced To ₹30.50

The board of Automotive Axles Limited (NSE:AUTOAXLES) has announced that the dividend on 11th of September will be reduced by 4.7% from last year's ₹32.00 to ₹30.50. This means the annual payment is 1.8% of the current stock price, which is above the average for the industry.

Our free stock report includes 1 warning sign investors should be aware of before investing in Automotive Axles. Read for free now.

Automotive Axles' Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Automotive Axles' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 17.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Automotive Axles

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹2.50 in 2015, and the most recent fiscal year payment was ₹32.00. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Automotive Axles has grown earnings per share at 30% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Automotive Axles Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Automotive Axles does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 1 warning sign for Automotive Axles that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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