Talbros Automotive Components (NSE:TALBROAUTO) Is Paying Out A Larger Dividend Than Last Year

Talbros Automotive Components Limited (NSE:TALBROAUTO) has announced that it will be increasing its dividend on the 27th of October to ₹2.00. This takes the annual payment to 0.6% of the current stock price, which is about average for the industry.

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 59% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Talbros Automotive Components

Talbros Automotive Components' Earnings Easily Cover the Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Talbros Automotive Components' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 32.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 4.8% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2011, the first annual payment was ₹1.20, compared to the most recent full-year payment of ₹2.00. This means that it has been growing its distributions at 5.2% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Talbros Automotive Components has grown earnings per share at 32% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Talbros Automotive Components' Dividend

Overall, a dividend increase is always good, and we think that Talbros Automotive Components is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 4 warning signs for Talbros Automotive Components that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

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This article by Simply Wall St is general in nature. 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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