Talbros Automotive Components (NSE:TALBROAUTO) Has Announced That It Will Be Increasing Its Dividend To ₹2.00

Talbros Automotive Components Limited's (NSE:TALBROAUTO) dividend will be increasing from last year's payment of the same period to ₹2.00 on 25th of October. Despite this raise, the dividend yield of 0.3% is only a modest boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Talbros Automotive Components' stock price has increased by 68% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Talbros Automotive Components

Talbros Automotive Components' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Talbros Automotive Components was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 18.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 5.5%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 ₹1.20 in 2013, and the most recent fiscal year payment was ₹3.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.6% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

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. We are encouraged to see that Talbros Automotive Components has grown earnings per share at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Talbros Automotive Components' prospects of growing its dividend payments in the future.

We Really Like Talbros Automotive Components' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. All of these factors considered, we think this has solid potential as a dividend stock.

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. For instance, we've picked out 1 warning sign for Talbros Automotive Components that investors should take into consideration. Is Talbros Automotive Components 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.