Turners Automotive Group's (NZSE:TRA) Dividend Will Be NZ$0.0706

Turners Automotive Group Limited (NZSE:TRA) will pay a dividend of NZ$0.0706 on the 27th of April. This means the dividend yield will be fairly typical at 6.9%.

View our latest analysis for Turners Automotive Group

Turners Automotive Group's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Turners Automotive Group's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 14.5% over the next year. If the dividend continues on this path, the payout ratio could be 71% by next year, which we think can be pretty sustainable going forward.

Turners Automotive Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 9 years was NZ$0.05 in 2014, and the most recent fiscal year payment was NZ$0.24. This means that it has been growing its distributions at 19% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

We Could See Turners Automotive Group's Dividend Growing

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 impressed us by growing EPS at 7.3% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Turners Automotive Group's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Turners Automotive Group is a great stock to add to your portfolio if income is your focus.

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. For example, we've identified 2 warning signs for Turners Automotive Group (1 makes us a bit uncomfortable!) 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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