Jerash Holdings (US) (NASDAQ:JRSH) Is Due To Pay A Dividend Of $0.05

The board of Jerash Holdings (US), Inc. (NASDAQ:JRSH) has announced that it will pay a dividend on the 23rd of February, with investors receiving $0.05 per share. This means the annual payment is 6.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Jerash Holdings (US)

Jerash Holdings (US) Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Jerash Holdings (US) is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. This gives us some comfort about the level of the dividend payments.

Earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we could see the payout ratio reach 553%, which is on the unsustainable side.

Jerash Holdings (US) Is Still Building Its Track Record

Jerash Holdings (US)'s dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The payments haven't really changed that much since 5 years ago. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Over the past five years, it looks as though Jerash Holdings (US)'s EPS has declined at around 13% a year. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Jerash Holdings (US)'s Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Jerash Holdings (US) 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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