Centrepoint Alliance (ASX:CAF) Has Affirmed Its Dividend Of A$0.01

The board of Centrepoint Alliance Limited (ASX:CAF) has announced that it will pay a dividend on the 29th of September, with investors receiving A$0.01 per share. This means the annual payment is 5.2% of the current stock price, which is above the average for the industry.

See our latest analysis for Centrepoint Alliance

Centrepoint Alliance's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Centrepoint Alliance's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 51.8% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

Centrepoint Alliance's Dividend Has Lacked Consistency

Looking back, Centrepoint Alliance's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 8 years was A$0.022 in 2014, and the most recent fiscal year payment was A$0.015. This works out to be a decline of approximately 4.7% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Centrepoint Alliance has seen EPS rising for the last five years, at 52% per annum. Centrepoint Alliance is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We should note that Centrepoint Alliance has issued stock equal to 36% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

We Really Like Centrepoint Alliance's Dividend

Overall, we like to see the dividend staying consistent, and we think Centrepoint Alliance might even raise payments in the future. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 5 warning signs for Centrepoint Alliance 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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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.