G N A Axles' (NSE:GNA) Dividend Will Be Reduced To ₹2.00

G N A Axles Limited's (NSE:GNA) dividend is being reduced from last year's payment covering the same period to ₹2.00 on the 19th of October. This means that the dividend yield is 0.5%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for G N A Axles

G N A Axles' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. But before making this announcement, G N A Axles' earnings quite easily covered the dividend. The business is earning enough to make the dividend feasible, but the cash payout ratio of 88% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

The next year is set to see EPS grow by 22.3%. If the dividend continues on this path, the payout ratio could be 8.5% by next year, which we think can be pretty sustainable going forward.

G N A Axles' Dividend Has Lacked Consistency

It's comforting to see that G N A Axles has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the dividend has gone from ₹1.00 total annually to ₹2.00. This means that it has been growing its distributions at 12% per annum 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.

G N A Axles Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that G N A Axles has been growing its earnings per share at 6.2% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On G N A Axles' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While G N A Axles is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for G N A Axles that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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