Centaur Media Plc's (LON:CAU) dividend will be increasing from last year's payment of the same period to £0.012 on 24th of May. This makes the dividend yield 4.7%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Centaur Media's stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Centaur Media

Centaur Media's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Centaur Media was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

If the trend of the last few years continues, EPS will grow by 82.2% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The last annual payment of £0.024 was flat on the annual payment from10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Centaur Media has been growing its earnings per share at 82% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Our Thoughts On Centaur Media's Dividend

Overall, we always like to see the dividend being raised, but we don't think Centaur Media will make a great income stock. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Centaur Media is a great stock to add to your portfolio if income is your focus.