U.S. Markets open in 2 hrs 3 mins
  • S&P Futures

    -22.50 (-0.50%)
  • Dow Futures

    -92.00 (-0.27%)
  • Nasdaq Futures

    -123.75 (-0.83%)
  • Russell 2000 Futures

    -4.60 (-0.23%)
  • Crude Oil

    -1.53 (-1.79%)
  • Gold

    -8.30 (-0.45%)
  • Silver

    -0.29 (-1.16%)

    +0.0022 (+0.1928%)
  • 10-Yr Bond

    0.0000 (0.00%)
  • Vix

    +3.21 (+13.46%)

    -0.0036 (-0.2659%)

    -0.3430 (-0.3006%)

    -3,319.08 (-7.90%)
  • CMC Crypto 200

    -83.80 (-8.42%)
  • FTSE 100

    -81.53 (-1.07%)
  • Nikkei 225

    -250.64 (-0.90%)

Computershare (ASX:CPU) Has Affirmed Its Dividend Of AU$0.23

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

The board of Computershare Limited (ASX:CPU) has announced that it will pay a dividend on the 13th of September, with investors receiving AU$0.23 per share. This payment means that the dividend yield will be 2.8%, which is around the industry average.

View our latest analysis for Computershare

Computershare Doesn't Earn Enough To Cover Its Payments

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Looking forward, earnings per share is forecast to fall by 19.3% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 178%, which is definitely a bit high to be sustainable going forward.


Computershare Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from US$0.27 in 2011 to the most recent annual payment of US$0.34. This implies that the company grew its distributions at a yearly rate of about 2.1% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 3.4% per annum over the last five years, which admittedly is a bit slow. So the company has struggled to grow its EPS yet it's still paying out 102% of its earnings. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

We'd also point out that Computershare has issued stock equal to 12% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Computershare's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Computershare (of which 1 doesn't sit too well with us!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.