Cleanaway Waste Management's (ASX:CWY) Upcoming Dividend Will Be Larger Than Last Year's

By
Simply Wall St
Published
September 06, 2021
ASX:CWY
Source: Shutterstock

Cleanaway Waste Management Limited (ASX:CWY) will increase its dividend on the 5th of October to AU$0.024. This takes the annual payment to 1.7% of the current stock price, which is about average for the industry.

See our latest analysis for Cleanaway Waste Management

Cleanaway Waste Management's Earnings Easily Cover the Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Cleanaway Waste Management was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 10.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 69% by next year, which is in a pretty sustainable range.

historic-dividend
ASX:CWY Historic Dividend September 6th 2021

Cleanaway Waste Management Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2014, the first annual payment was AU$0.015, compared to the most recent full-year payment of AU$0.047. This implies that the company grew its distributions at a yearly rate of about 18% over that duration. Cleanaway Waste Management has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Cleanaway Waste Management has grown earnings per share at 20% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Cleanaway Waste Management could prove to be a strong dividend payer.

Cleanaway Waste Management Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 12 analysts we track are forecasting for Cleanaway Waste Management for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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