Centerra Gold (TSE:CG) Has Announced A Dividend Of $0.07
Centerra Gold Inc. (TSE:CG) has announced that it will pay a dividend of $0.07 per share on the 29th of August. Based on this payment, the dividend yield on the company's stock will be 3.5%, which is an attractive boost to shareholder returns.
View our latest analysis for Centerra Gold
Centerra Gold's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. Even in the absence of profits, Centerra Gold is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.
Looking forward, earnings per share is forecast to rise by 142.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 53%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of $0.157 in 2013 to the most recent total annual payment of $0.209. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
Dividend Growth Is Doubtful
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. In the last five years, Centerra Gold's earnings per share has shrunk at approximately 5.3% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
We're Not Big Fans Of Centerra Gold's Dividend
In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Centerra Gold that investors need to be conscious of moving forward. Is Centerra Gold not quite the opportunity you were looking for? Why not check out 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.
