Cedar Woods Properties' (ASX:CWP) Dividend Will Be Reduced To A$0.07
Cedar Woods Properties Limited (ASX:CWP) is reducing its dividend from last year's comparable payment to A$0.07 on the 27th of October. However, the dividend yield of 3.8% still remains in a typical range for the industry.
See our latest analysis for Cedar Woods Properties
Cedar Woods Properties' Earnings Easily Cover The Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Cedar Woods Properties' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 43.3%. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from A$0.25 total annually to A$0.20. Doing the maths, this is a decline of about 2.2% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth May Be Hard To Come By
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Cedar Woods Properties has seen earnings per share falling at 6.5% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
Our Thoughts On Cedar Woods Properties' Dividend
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Cedar Woods Properties (of which 1 is potentially serious!) you should know about. Is Cedar Woods Properties not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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