Igarashi Motors India (NSE:IGARASHI) Is Paying Out A Larger Dividend Than Last Year

Igarashi Motors India Limited (NSE:IGARASHI) will increase its dividend from last year's comparable payment on the 7th of September to ₹2.50. Although the dividend is now higher, the yield is only 0.4%, which is below the industry average.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Igarashi Motors India's Projected Earnings Seem Likely To Cover Future Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Igarashi Motors India was paying a whopping 201% as a dividend, but this only made up 33% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

EPS is set to fall by 4.2% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 31%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Check out our latest analysis for Igarashi Motors India

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹4.44 in 2015, and the most recent fiscal year payment was ₹2.50. The dividend has shrunk at around 5.6% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Achieve

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. In the last five years, Igarashi Motors India's earnings per share has shrunk at approximately 4.2% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Igarashi Motors India's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Igarashi Motors India has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.