Jullundur Motor Agency (Delhi) (NSE:JMA) Has Announced A Dividend Of ₹2.00

The board of Jullundur Motor Agency (Delhi) Limited (NSE:JMA) has announced that it will pay a dividend of ₹2.00 per share on the 28th of September. Based on this payment, the dividend yield on the company's stock will be 1.8%, which is an attractive boost to shareholder returns.

View our latest analysis for Jullundur Motor Agency (Delhi)

Jullundur Motor Agency (Delhi)'s Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Jullundur Motor Agency (Delhi) was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 15.8% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which is in the range that makes us comfortable with the sustainability of the dividend.

Jullundur Motor Agency (Delhi) Is Still Building Its Track Record

It is great to see that Jullundur Motor Agency (Delhi) has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 9 years was ₹0.80 in 2015, and the most recent fiscal year payment was ₹2.00. This means that it has been growing its distributions at 11% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Jullundur Motor Agency (Delhi) has grown earnings per share at 16% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Jullundur Motor Agency (Delhi) Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Jullundur Motor Agency (Delhi) that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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