ClearView Wealth's (ASX:CVW) Dividend Will Be Increased To A$0.03
ClearView Wealth Limited (ASX:CVW) will increase its dividend from last year's comparable payment on the 22nd of September to A$0.03. This will take the annual payment to 5.5% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for ClearView Wealth
ClearView Wealth Doesn't Earn Enough To Cover Its Payments
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, ClearView Wealth's dividend made up quite a large proportion of earnings but only 41% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
Looking forward, EPS could fall by 6.1% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 101%, which is definitely a bit high to be sustainable going forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the annual payment back then was A$0.018, compared to the most recent full-year payment of A$0.03. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
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. ClearView Wealth has seen earnings per share falling at 6.1% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
Our Thoughts On ClearView Wealth's Dividend
In summary, while it's always good to see the dividend being raised, we don't think ClearView Wealth's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think ClearView Wealth is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, ClearView Wealth has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of 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.
