Corby Spirit and Wine's (TSE:CSW.A) Dividend Will Be Increased To CA$0.22

Corby Spirit and Wine Limited (TSE:CSW.A) will increase its dividend from last year's comparable payment on the 27th of September to CA$0.22. This will take the annual payment to 6.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Corby Spirit and Wine

Corby Spirit and Wine Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 101% of what it was earning and 86% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

If the company can't turn things around, EPS could fall by 1.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 105%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from CA$1.22 total annually to CA$0.85. The dividend has shrunk at around 3.5% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Corby Spirit and Wine May Find It Hard To Grow The Dividend

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. Unfortunately, Corby Spirit and Wine's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Corby Spirit and Wine will make a great income stock. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Corby Spirit and Wine you should be aware of, and 1 of them can't be ignored. Is Corby Spirit and Wine not quite the opportunity you were looking for? Why not check out our selection of top 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.