Talbros Automotive Components (NSE:TALBROAUTO) Will Pay A Larger Dividend Than Last Year At ₹2.00

Talbros Automotive Components Limited's (NSE:TALBROAUTO) periodic dividend will be increasing on the 25th of October to ₹2.00, with investors receiving 33% more than last year's ₹1.50. This takes the annual payment to 0.5% of the current stock price, which unfortunately is below what the industry is paying.

Check out 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 19.4% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 6.2% 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. The annual payment during the last 10 years was ₹1.20 in 2013, and the most recent fiscal year payment was ₹2.50. This implies that the company grew its distributions at a yearly rate of about 7.6% 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. Talbros Automotive Components might have put its house in order since then, but we remain cautious.

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. It's encouraging to see that Talbros Automotive Components has been growing its earnings per share at 19% a year over the past five years. Talbros Automotive Components definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Talbros Automotive Components Looks Like A Great Dividend Stock

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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Talbros Automotive Components that investors need to be conscious of moving forward. 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.