Cedar Woods Properties' (ASX:CWP) Upcoming Dividend Will Be Larger Than Last Year's

The board of Cedar Woods Properties Limited (ASX:CWP) has announced that it will be increasing its dividend on the 29th of October to AU$0.14. This makes the dividend yield 4.0%, which is above the industry average.

See our latest analysis for Cedar Woods Properties

Cedar Woods Properties' Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Cedar Woods Properties was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 17.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 54% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from AU$0.22 in 2011 to the most recent annual payment of AU$0.27. This implies that the company grew its distributions at a yearly rate of about 1.9% over that duration. 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.

Dividend Growth Is Doubtful

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. In the last five years, Cedar Woods Properties' earnings per share has shrunk at approximately 6.0% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Cedar Woods Properties' Dividend

Overall, we always like to see the dividend being raised, but we don't think Cedar Woods Properties will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Cedar Woods Properties is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Cedar Woods Properties that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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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.
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