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Carlton Investments Ltd. (ASX:CIN) will increase its dividend on the 16th of September to A$0.63, which is 5.0% higher than last year's payment from the same period of A$0.60. This makes the dividend yield about the same as the industry average at 3.3%.
View our latest analysis for Carlton Investments
Carlton Investments' Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. However, Carlton Investments' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, EPS could fall by 3.1% 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, we estimate the payout ratio could be 71%, which is definitely feasible to continue.
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 2014, the annual payment back then was A$1.00, compared to the most recent full-year payment of A$1.01. Dividend payments have been growing, but very slowly over the period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.
Carlton Investments May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's not great to see that Carlton Investments' earnings per share has fallen at approximately 3.1% per year over the past five years. 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.
In Summary
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Carlton Investments (1 is significant!) that you should be aware of before investing. Is Carlton Investments 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.