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) has announced that it will pay a dividend of CA$0.28 per share on the 7th of September. The dividend yield will be 1.8% based on this payment which is still above the industry average.

View our latest analysis for Calian Group

Calian Group's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Calian Group was paying out 94% of earnings, but a comparatively small 20% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, earnings per share is forecast to rise by 177.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

historic-dividend
TSX:CGY Historic Dividend August 15th 2022

Calian Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was CA$1.04 in 2012, and the most recent fiscal year payment was CA$1.12. Dividend payments have been growing, but very slowly over the period. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

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 9.1% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Calian Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection 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.