Computershare's (ASX:CPU) Upcoming Dividend Will Be Larger Than Last Year's

The board of Computershare Limited (ASX:CPU) has announced that it will be paying its dividend of $0.48 on the 15th of September, an increased payment from last year's comparable dividend. This takes the annual payment to 2.0% of the current stock price, which unfortunately is below what the industry is paying.

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Computershare's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. The last dividend was quite easily covered by Computershare's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

EPS is set to grow by 41.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 75%, which is on the higher side, but certainly still feasible.

Check out our latest analysis for Computershare

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $0.232 in 2015, and the most recent fiscal year payment was $0.537. This implies that the company grew its distributions at a yearly rate of about 8.7% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Computershare might have put its house in order since then, but we remain cautious.

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 Computershare has been growing its earnings per share at 13% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

We Really Like Computershare's Dividend

Overall, a dividend increase is always good, and we think that Computershare is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

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. As an example, we've identified 1 warning sign for Computershare that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.