Centerra Gold (TSE:CG) Is Paying Out A Dividend Of $0.07

The board of Centerra Gold Inc. (TSE:CG) has announced that it will pay a dividend on the 2nd of December, with investors receiving $0.07 per share. This means the annual payment is 4.0% of the current stock price, which is above the average for the industry.

View our latest analysis for Centerra Gold

Centerra Gold Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Centerra Gold was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

EPS is set to fall by 81.2% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 112%, which is definitely a bit high to be sustainable going forward.

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. The annual payment during the last 10 years was $0.0995 in 2012, and the most recent fiscal year payment was $0.208. This works out to be a compound annual growth rate (CAGR) of approximately 7.7% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Centerra Gold has grown earnings per share at 19% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Centerra Gold is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Centerra Gold has 3 warning signs (and 2 which don't sit too well with us) we think you should know about. Is Centerra Gold not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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