Jerash Holdings (US)'s (NASDAQ:JRSH) Dividend Will Be $0.05
Jerash Holdings (US), Inc. (NASDAQ:JRSH) will pay a dividend of $0.05 on the 28th of November. The dividend yield will be 6.2% based on this payment which is still above the industry average.
Check out our latest analysis for Jerash Holdings (US)
Jerash Holdings (US)'s Payment Has Solid Earnings Coverage
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 212% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 41%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.
Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 27%, which is in a comfortable range for us.
Jerash Holdings (US) Is Still Building Its Track Record
It is great to see that Jerash Holdings (US) has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The last annual payment of $0.20 was flat on the annual payment from5 years ago. Jerash Holdings (US) hasn't been paying a dividend for very long, so we wouldn't get to excited about its record of growth just yet.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Earnings per share has been sinking by 31% over the last five years. 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. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for Jerash Holdings (US) that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
