Jay Bharat Maruti (NSE:JAYBARMARU) Has Affirmed Its Dividend Of ₹0.70

Jay Bharat Maruti Limited (NSE:JAYBARMARU) will pay a dividend of ₹0.70 on the 12th of October. Based on this payment, the dividend yield will be 0.7%, which is fairly typical for the industry.

Check out our latest analysis for Jay Bharat Maruti

Jay Bharat Maruti's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Jay Bharat Maruti's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 6.9% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 27%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ₹0.25 in 2014, and the most recent fiscal year payment was ₹0.70. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Jay Bharat Maruti has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Is Doubtful

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. In the last five years, Jay Bharat Maruti's earnings per share has shrunk at approximately 6.9% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On Jay Bharat Maruti's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. To that end, Jay Bharat Maruti has 2 warning signs (and 1 which is a bit unpleasant) 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.

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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.