Stock Analysis

Calian Group (TSE:CGY) Has Announced A Dividend Of CA$0.28

TSX:CGY
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Calian Group Ltd. (TSE:CGY) will pay a dividend of CA$0.28 on the 9th of March. Based on this payment, the dividend yield on the company's stock will be 2.0%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Calian Group

Calian Group's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Calian Group's dividend made up quite a large proportion of earnings but only 41% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 73.9%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 56% which would be quite comfortable going to take the dividend forward.

historic-dividend
TSX:CGY Historic Dividend February 14th 2022

Calian Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from CA$1.00 in 2012 to the most recent annual payment of CA$1.12. This works out to be a compound annual growth rate (CAGR) of approximately 1.1% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Is Doubtful

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Calian Group has seen earnings per share falling at 9.3% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The company has also been raising capital by issuing stock equal to 15% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Calian Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Calian Group's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've picked out 4 warning signs for Calian Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list 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.