There's A Lot To Like About Jullundur Motor Agency (Delhi)'s (NSE:JMA) Upcoming ₹3.00 Dividend
It looks like Jullundur Motor Agency (Delhi) Limited (NSE:JMA) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Jullundur Motor Agency (Delhi)'s shares before the 18th of August in order to receive the dividend, which the company will pay on the 23rd of September.
The company's upcoming dividend is ₹3.00 a share, following on from the last 12 months, when the company distributed a total of ₹2.00 per share to shareholders. Based on the last year's worth of payments, Jullundur Motor Agency (Delhi) has a trailing yield of 2.2% on the current stock price of ₹89.60. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Jullundur Motor Agency (Delhi) is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 43% of its free cash flow as dividends, a comfortable payout level for most companies.
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.
See our latest analysis for Jullundur Motor Agency (Delhi)
Click here to see how much of its profit Jullundur Motor Agency (Delhi) paid out over the last 12 months.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Jullundur Motor Agency (Delhi)'s earnings per share have risen 11% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Jullundur Motor Agency (Delhi) has lifted its dividend by approximately 9.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Has Jullundur Motor Agency (Delhi) got what it takes to maintain its dividend payments? Jullundur Motor Agency (Delhi) has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Overall we think this is an attractive combination and worthy of further research.
On that note, you'll want to research what risks Jullundur Motor Agency (Delhi) is facing. For example, we've found 1 warning sign for Jullundur Motor Agency (Delhi) that we recommend you consider before investing in the business.
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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.