India Motor Parts & Accessories (NSE:IMPAL) Will Pay A Larger Dividend Than Last Year At ₹20.00

India Motor Parts & Accessories Limited's (NSE:IMPAL) periodic dividend will be increasing on the 21st of August to ₹20.00, with investors receiving 11% more than last year's ₹18.00. This takes the dividend yield to 2.7%, which shareholders will be pleased with.

We've discovered 1 warning sign about India Motor Parts & Accessories. View them for free.

India Motor Parts & Accessories' Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite comfortably covered by India Motor Parts & Accessories' earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS could expand by 9.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for India Motor Parts & Accessories

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ₹6.00 total annually to ₹28.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. India Motor Parts & Accessories has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

India Motor Parts & Accessories Could Grow Its Dividend

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. It's encouraging to see that India Motor Parts & Accessories has been growing its earnings per share at 9.8% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Our Thoughts On India Motor Parts & Accessories' Dividend

In summary, while it's always good to see the dividend being raised, we don't think India Motor Parts & Accessories' payments are rock solid. While India Motor Parts & Accessories is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 1 warning sign for India Motor Parts & Accessories that you should be aware of before investing. Is India Motor Parts & Accessories 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.