Turners Automotive Group Limited (NZSE:TRA) Stock Goes Ex-Dividend In Just Four Days
Turners Automotive Group Limited (NZSE:TRA) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Turners Automotive Group's shares on or after the 11th of March will not receive the dividend, which will be paid on the 27th of March.
The company's next dividend payment will be NZ$0.0705882 per share, on the back of last year when the company paid a total of NZ$0.23 to shareholders. Last year's total dividend payments show that Turners Automotive Group has a trailing yield of 4.8% on the current share price of NZ$4.78. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Turners Automotive Group
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Turners Automotive Group paid out more than half (61%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Turners Automotive Group generated enough free cash flow to afford its dividend. Dividends consumed 63% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Turners Automotive Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Turners Automotive Group earnings per share are up 5.7% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Turners Automotive Group has lifted its dividend by approximately 16% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is Turners Automotive Group worth buying for its dividend? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
If you're not too concerned about Turners Automotive Group's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To that end, you should learn about the 3 warning signs we've spotted with Turners Automotive Group (including 1 which is a bit concerning).
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
