Cleanaway Waste Management (ASX:CWY) Has Announced A Dividend Of A$0.0245

Cleanaway Waste Management Limited's (ASX:CWY) investors are due to receive a payment of A$0.0245 per share on 8th of April. This means the annual payment will be 1.8% of the current stock price, which is lower than the industry average.

View our latest analysis for Cleanaway Waste Management

Cleanaway Waste Management's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, the company was paying out 234% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 48%, which is in a comfortable range for us.

Cleanaway Waste Management Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of A$0.015 in 2014 to the most recent total annual payment of A$0.049. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Earnings per share has been sinking by 19% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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 becomes a long term trend.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Cleanaway Waste Management's payments, as there could be some issues with sustaining them into the future. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Cleanaway Waste Management that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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