Centrepoint Alliance (ASX:CAF) Is Due To Pay A Dividend Of A$0.0175

Centrepoint Alliance Limited's (ASX:CAF) investors are due to receive a payment of A$0.0175 per share on 2nd of October. This makes the dividend yield 6.5%, which will augment investor returns quite nicely.

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Centrepoint Alliance's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Centrepoint Alliance's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share could rise by 31.4% over the next year if things go the same way as they have for the last few years. If recent patterns in the dividend continue, the payout ratio in 12 months could be 88% which is a bit high but can definitely be sustainable.

See our latest analysis for Centrepoint Alliance

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of A$0.02 in 2015 to the most recent total annual payment of A$0.03. This means that it has been growing its distributions at 4.1% per annum over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Centrepoint Alliance's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Centrepoint Alliance has impressed us by growing EPS at 31% per year over the past five years. EPS has been growing well, but Centrepoint Alliance has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Our Thoughts On Centrepoint Alliance's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Centrepoint Alliance is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 4 warning signs for Centrepoint Alliance that investors need to be conscious of moving forward. 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.