Carlton Investments (ASX:CIN) Has Announced That It Will Be Increasing Its Dividend To A$0.58

The board of Carlton Investments Limited (ASX:CIN) has announced that it will be paying its dividend of A$0.58 on the 19th of September, an increased payment from last year's comparable dividend. This takes the annual payment to 2.6% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Carlton Investments

Carlton Investments' Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Carlton Investments was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

If the company can't turn things around, EPS could fall by 3.2% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 75% in the next 12 months which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the annual payment back then was A$0.78, compared to the most recent full-year payment of A$0.84. Its dividends have grown at less than 1% per annum over this time frame. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. In the last five years, Carlton Investments' earnings per share has shrunk at approximately 3.2% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On Carlton Investments' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Carlton Investments' payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Carlton Investments has been making. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Carlton Investments (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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