Autosports Group Limited (ASX:ASG) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of May to A$0.09. This will take the dividend yield to an attractive 8.6%, providing a nice boost to shareholder returns.

Check out our latest analysis for Autosports Group

Autosports Group's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Autosports Group's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to fall by 18.3% over the next 12 months. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 81%, meaning that most of the company's earnings are being paid out to shareholders. historic-dividend

Autosports Group's Dividend Has Lacked Consistency

Autosports Group has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the annual payment back then was A$0.046, compared to the most recent full-year payment of A$0.18. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. Autosports Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Autosports Group has been growing its earnings per share at 21% a year over the past five years. Autosports Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.



Autosports Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Autosports Group (1 is concerning!) that you should be aware of before investing. 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.

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