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 makes the dividend yield 5.1%, which will augment investor returns quite nicely.
See 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 its earnings are being retained to grow the business.
The next year is set to see EPS grow by 38.4%. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.
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 2012, the first annual payment was CA$0.90, compared to the most recent full-year payment of CA$0.72. The dividend has shrunk at around 2.2% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
Dividend Growth May Be Hard To Achieve
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. Earnings has been rising at 2.1% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, CI Financial has the option to increase the payout ratio to return more cash to shareholders.
In Summary
In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 5 warning signs for CI Financial (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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