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The board of Centaur Media Plc (LON:CAU) has announced that it will pay a dividend on the 23rd of May, with investors receiving £0.012 per share. Based on this payment, the dividend yield on the company's stock will be 7.2%, which is an attractive boost to shareholder returns.
Centaur Media's Long-term Dividend Outlook appears Promising
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Centaur Media isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This is quite a strong warning sign that the dividend may not be sustainable.
Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 2.5%, which makes us pretty comfortable with the sustainability of the dividend.
View our latest analysis for Centaur Media
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was £0.0255, compared to the most recent full-year payment of £0.018. This works out to be a decline of approximately 3.4% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.
The Company Could Face Some Challenges Growing 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 encouraging to see that Centaur Media has been growing its earnings per share at 42% a year over the past five years. While the company is not yet turning a profit, it is growing at a good rate. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Strong earnings growth means Centaur Media has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Centaur Media (1 is a bit concerning!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.