Turners Automotive Group's (NZSE:TRA) Upcoming Dividend Will Be Larger Than Last Year's

Turners Automotive Group Limited (NZSE:TRA) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of July to NZ$0.0882. This makes the dividend yield about the same as the industry average at 6.4%.

Check out our latest analysis for Turners Automotive Group

Turners Automotive Group's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Based on the last dividend, Turners Automotive Group is earning enough to cover the payment, but then it makes up 200% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 30.1%. Assuming the dividend continues along recent trends, we think the payout ratio could be 68% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from NZ$0.05 total annually to NZ$0.255. This means that it has been growing its distributions at 18% per annum over that time. 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.

We Could See Turners Automotive Group's Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Turners Automotive Group has grown earnings per share at 7.3% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On Turners Automotive Group's Dividend

Overall, we always like to see the dividend being raised, but we don't think Turners Automotive Group will make a great income stock. While Turners Automotive Group is earning enough to cover the payments, the cash flows are lacking. We don't think Turners Automotive Group is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Turners Automotive Group has 3 warning signs (and 1 which is a bit concerning) we think you should know about. 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.

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