ClearView Wealth (ASX:CVW) Is Paying Out A Larger Dividend Than Last Year

ClearView Wealth Limited (ASX:CVW) will increase its dividend from last year's comparable payment on the 22nd of September to A$0.03. This will take the annual payment to 5.5% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for ClearView Wealth

ClearView Wealth Is Paying Out More Than It Is Earning

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment made up 92% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

If the company can't turn things around, EPS could fall by 6.1% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 101%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was A$0.018, compared to the most recent full-year payment of A$0.03. This means that it has been growing its distributions at 5.2% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, ClearView Wealth's earnings per share has shrunk at approximately 6.1% 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.

In Summary

Overall, we always like to see the dividend being raised, but we don't think ClearView Wealth will make a great income stock. 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. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 2 warning signs for ClearView Wealth (of which 1 is concerning!) you should know about. 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.