JTEKT India (NSE:JTEKTINDIA) Has Announced That It Will Be Increasing Its Dividend To ₹0.60

JTEKT India Limited (NSE:JTEKTINDIA) will increase its dividend from last year's comparable payment on the 12th of September to ₹0.60. Despite this raise, the dividend yield of 0.3% is only a modest boost to shareholder returns.

See our latest analysis for JTEKT India

JTEKT India's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, JTEKT India was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 62.4%. If the dividend continues on this path, the payout ratio could be 8.4% by next year, which we think can be pretty sustainable going forward.

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 ₹0.80 in 2014, and the most recent fiscal year payment was ₹0.60. This works out to be a decline of approximately 2.8% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

JTEKT India Could Grow Its Dividend

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. It's encouraging to see that JTEKT India has been growing its earnings per share at 7.2% 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. As an example, we've identified 2 warning signs for JTEKT India that you should be aware of before investing. Is JTEKT India not quite the opportunity you were looking for? Why not check out our selection of top 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.

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