The board of CI Financial Corp. (TSE:CIX) has announced that it will pay a dividend of CA$0.18 per share on the 14th of October. This means the annual payment is 4.7% of the current stock price, which is above the average for the industry.

Check out our latest analysis for CI Financial

CI Financial's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, CI Financial was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 29.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 20% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was CA$0.90 in 2012, and the most recent fiscal year payment was CA$0.72. This works out to be a decline of approximately 2.2% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, CI Financial has only grown its earnings per share at 4.5% per annum over the past five years. While EPS growth is quite low, CI Financial has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On CI Financial's Dividend

Overall, we think CI Financial is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for CI Financial (of which 1 doesn't sit too well with us!) you should know about. Is CI Financial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.