Why You Might Be Interested In Cleanaway Waste Management Limited (ASX:CWY) For Its Upcoming Dividend

Cleanaway Waste Management Limited (ASX:CWY) is about to trade ex-dividend in the next 4 days. Investors can purchase shares before the 2nd of March in order to be eligible for this dividend, which will be paid on the 7th of April.

Cleanaway Waste Management's next dividend payment will be AU$0.022 per share. Last year, in total, the company distributed AU$0.045 to shareholders. Last year's total dividend payments show that Cleanaway Waste Management has a trailing yield of 2.0% on the current share price of A$2.2. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Cleanaway Waste Management

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Cleanaway Waste Management is paying out an acceptable 62% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 35% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Cleanaway Waste Management's earnings per share have been growing at 15% a year for the past five years. Cleanaway Waste Management has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, seven years ago, Cleanaway Waste Management has lifted its dividend by approximately 17% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Has Cleanaway Waste Management got what it takes to maintain its dividend payments? Cleanaway Waste Management's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 1 warning sign with Cleanaway Waste Management and understanding them should be part of your investment process.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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