Lumax Auto Technologies' (NSE:LUMAXTECH) Dividend Will Be Increased To ₹3.00

Lumax Auto Technologies Limited's (NSE:LUMAXTECH) dividend will be increasing to ₹3.00 on 30th of September. This makes the dividend yield 1.8%, which is above the industry average.

View our latest analysis for Lumax Auto Technologies

Lumax Auto Technologies' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Lumax Auto Technologies was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 52.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was ₹1.20 in 2011, and the most recent fiscal year payment was ₹3.00. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Lumax Auto Technologies might have put its house in order since then, but we remain cautious.

We Could See Lumax Auto Technologies' Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Lumax Auto Technologies has seen EPS rising for the last five years, at 8.2% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Lumax Auto Technologies Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Lumax Auto Technologies is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Lumax Auto Technologies that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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