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

Cleanaway Waste Management Limited (ASX:CWY) has announced that it will be increasing its dividend from last year's comparable payment on the 7th of October to A$0.032. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

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Cleanaway Waste Management's Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Cleanaway Waste Management's dividend was only 68% of earnings, however it was paying out 110% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 58.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Cleanaway Waste Management

Cleanaway Waste Management Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was A$0.014 in 2015, and the most recent fiscal year payment was A$0.064. This means that it has been growing its distributions at 16% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Cleanaway Waste Management has impressed us by growing EPS at 9.8% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Cleanaway Waste Management's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Cleanaway Waste Management that investors should take into consideration. 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.