Caledonia Investments (LON:CLDN) Has Announced A Dividend Of £0.1969

The board of Caledonia Investments Plc (LON:CLDN) has announced that it will pay a dividend of £0.1969 per share on the 9th of January. Even though the dividend went up, the yield is still quite low at only 2.1%.

Check out our latest analysis for Caledonia Investments

Caledonia Investments' Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Caledonia Investments was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Unless the company can turn things around, EPS could fall by 1.1% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 37%, which is definitely feasible to continue.

Caledonia Investments Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the dividend has gone from £0.491 total annually to £0.704. This implies that the company grew its distributions at a yearly rate of about 3.7% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Unfortunately, Caledonia Investments' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Are management backing themselves to deliver performance? Check their shareholdings in Caledonia Investments in our latest insider ownership analysis. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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