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Channel Infrastructure NZ Limited (NZSE:CHI) has announced that it will pay a dividend of NZ$0.044 per share on the 20th of September. This payment means that the dividend yield will be 7.4%, which is around the industry average.
See our latest analysis for Channel Infrastructure NZ
Channel Infrastructure NZ Is Paying Out More Than It Is Earning
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Earnings per share is forecast to rise by 54.6% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 115% over the next year.
Channel Infrastructure NZ's Dividend Has Lacked Consistency
Looking back, Channel Infrastructure NZ's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the annual payment back then was NZ$0.10, compared to the most recent full-year payment of NZ$0.122. This implies that the company grew its distributions at a yearly rate of about 2.2% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.
Dividend Growth May Be Hard To Come By
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 Channel Infrastructure NZ's earnings per share has fallen at approximately 5.8% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.
Channel Infrastructure NZ's Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Channel Infrastructure NZ make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.