CVC's (ASX:CVC) Dividend Will Be A$0.04

The board of CVC Limited (ASX:CVC) has announced that it will pay a dividend on the 20th of February, with investors receiving A$0.04 per share. This means the dividend yield will be fairly typical at 4.5%.

Check out our latest analysis for CVC

CVC Is Paying Out More Than It Is Earning

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, earnings were actually smaller than the dividend, and the company was actually spending more cash than it was making. Paying out such a large dividend compared to earnings while also not generating free cash flows is a major warning sign for the sustainability of the dividend as these levels are certainly a bit high.

EPS is set to fall by 22.5% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 201%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was A$0.05 in 2013, and the most recent fiscal year payment was A$0.09. This works out to be a compound annual growth rate (CAGR) of approximately 6.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Has Limited Growth Potential

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. CVC's EPS has fallen by approximately 22% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

CVC's Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help CVC 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, CVC has 5 warning signs (and 3 which are significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here