Stock Analysis

Computer Modelling Group (TSE:CMG) Is Paying Out A Dividend Of CA$0.05

TSX:CMG
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The board of Computer Modelling Group Ltd. (TSE:CMG) has announced that it will pay a dividend on the 15th of September, with investors receiving CA$0.05 per share. Based on this payment, the dividend yield on the company's stock will be 2.4%, which is an attractive boost to shareholder returns.

See our latest analysis for Computer Modelling Group

Computer Modelling Group's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Computer Modelling Group's dividend made up quite a large proportion of earnings but only 64% 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 12.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 60%, which is in the range that makes us comfortable with the sustainability of the dividend.

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TSX:CMG Historic Dividend August 28th 2023

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 an annual total of CA$0.37 in 2013 to the most recent total annual payment of CA$0.20. Doing the maths, this is a decline of about 6.0% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Computer Modelling Group May Find It Hard To Grow The Dividend

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Earnings per share has been crawling upwards at 2.5% per year. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. This isn't the end of the world, but for investors looking for strong dividend growth they may want to look elsewhere.

Our Thoughts On Computer Modelling Group's Dividend

Overall, a consistent dividend is a good thing, and we think that Computer Modelling Group has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Computer Modelling Group that you should be aware of before investing. 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.