Turners Automotive Group (NZSE:TRA) Will Pay A Dividend Of NZ$0.0824

The board of Turners Automotive Group Limited (NZSE:TRA) has announced that it will pay a dividend of NZ$0.0824 per share on the 28th of July. This means the dividend yield will be fairly typical at 6.6%.

See our latest analysis for Turners Automotive Group

Turners Automotive Group's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend was quite comfortably covered by Turners Automotive Group's 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 is forecast to expand by 13.8%. If the dividend continues on this path, the payout ratio could be 70% by next year, which we think can be pretty sustainable going forward.

Turners Automotive Group's Dividend Has Lacked Consistency

It's comforting to see that Turners Automotive Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from an annual total of NZ$0.05 in 2014 to the most recent total annual payment of NZ$0.24. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. Turners Automotive Group 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.

The Dividend Has Growth Potential

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. Turners Automotive Group has seen EPS rising for the last five years, at 5.1% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Turners Automotive Group is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Turners Automotive Group (1 is a bit concerning!) that you should be aware of before investing. Is Turners Automotive Group 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.