Turners Automotive Group Limited (NZSE:TRA) Pays A NZ$0.071 Dividend In Just Four Days
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Turners Automotive Group Limited (NZSE:TRA) is about to go ex-dividend in just four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Turners Automotive Group's shares before the 10th of October in order to be eligible for the dividend, which will be paid on the 27th of October.
The company's next dividend payment will be NZ$0.071 per share. Last year, in total, the company distributed NZ$0.23 to shareholders. Calculating the last year's worth of payments shows that Turners Automotive Group has a trailing yield of 6.0% on the current share price of NZ$3.86. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Turners Automotive Group has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Turners Automotive Group
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Turners Automotive Group paid out 61% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out more than three-quarters (82%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Turners Automotive Group earnings per share are up 4.9% per annum over the last five years. A high payout ratio of 61% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Turners Automotive Group could be signalling that its future growth prospects are thin.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Turners Automotive Group has delivered 18% dividend growth per year on average over the past nine years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is Turners Automotive Group an attractive dividend stock, or better left on the shelf? Earnings per share have been growing modestly and Turners Automotive Group paid out a bit over half of its earnings and free cash flow last year. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
If you want to look further into Turners Automotive Group, it's worth knowing the risks this business faces. For example, Turners Automotive Group has 2 warning signs (and 1 which is a bit concerning) we think you should know about.
If you're in the market for strong dividend payers, we recommend checking 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.
