JBM Auto Limited (NSE:JBMA) will pay a dividend of ₹1.00 on the 26th of October. The dividend yield is 0.2% based on this payment, which is a little bit low compared to the other companies in the industry.
Check out our latest analysis for JBM Auto
JBM Auto's Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Based on the last payment, JBM Auto was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
Over the next year, EPS is forecast to expand by 26.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 5.5% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the dividend has gone from ₹0.20 total annually to ₹1.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. JBM Auto has seen EPS rising for the last five years, at 18% per annum. JBM Auto definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about JBM Auto's payments, as there could be some issues with sustaining them into the future. While JBM Auto is earning enough to cover the payments, the cash flows are lacking. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for JBM Auto that investors should take into consideration. 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.
About NSEI:JBMA
JBM Auto
Engages in the manufacture and sale sheet metal components, tools, dies and moulds, and buses in India and internationally.
Solid track record with worrying balance sheet.
