Interested In Turners Automotive Group's (NZSE:TRA) Upcoming NZ$0.0705882 Dividend? You Have Four Days Left

It looks like Turners Automotive Group Limited (NZSE:TRA) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Turners Automotive Group investors that purchase the stock on or after the 11th of March will not receive the dividend, which will be paid on the 27th of March.

The company's upcoming dividend is NZ$0.0705882 a share, following on from the last 12 months, when the company distributed a total of NZ$0.23 per share to shareholders. Last year's total dividend payments show that Turners Automotive Group has a trailing yield of 4.8% on the current share price of NZ$4.78. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Turners Automotive Group has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Turners Automotive Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Turners Automotive Group paid out 61% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 63% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Turners Automotive Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Turners Automotive Group earnings per share are up 5.7% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Turners Automotive Group has increased its dividend at approximately 16% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Turners Automotive Group worth buying for its dividend? Earnings per share have been growing modestly and Turners Automotive Group paid out a bit over half of its earnings and free cash flow last year. All things considered, we are not particularly enthused about Turners Automotive Group from a dividend perspective.

If you're not too concerned about Turners Automotive Group's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Our analysis shows 3 warning signs for Turners Automotive Group that we strongly recommend you have a look at before investing in the company.

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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.