Capral (ASX:CAA) Is Increasing Its Dividend To A$0.40

Capral Limited (ASX:CAA) will increase its dividend from last year's comparable payment on the 26th of March to A$0.40. Even though the dividend went up, the yield is still quite low at only 3.8%.

Check out our latest analysis for Capral

Capral's Future Dividend Projections Appear 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. However, Capral's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 12.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 20%, which is in the range that makes us comfortable with the sustainability of the dividend.

Capral's Dividend Has Lacked Consistency

It's comforting to see that Capral has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The annual payment during the last 8 years was A$0.375 in 2017, and the most recent fiscal year payment was A$0.40. Dividend payments have grown at less than 1% a year over this period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Capral has seen EPS rising for the last five years, at 14% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Capral's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Capral (1 doesn't sit too well with us!) that you should be aware of before investing. 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.