City of London Investment Group (LON:CLIG) Has Affirmed Its Dividend Of £0.22

City of London Investment Group PLC (LON:CLIG) will pay a dividend of £0.22 on the 4th of November. Based on this payment, the dividend yield on the company's stock will be 8.4%, which is an attractive boost to shareholder returns.

See our latest analysis for City of London Investment Group

City of London Investment Group Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, City of London Investment Group was paying out 77% of earnings, but a comparatively small 60% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 3.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 119%, which could put the dividend in jeopardy if the company's earnings don't improve.

City of London Investment Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was £0.24 in 2012, and the most recent fiscal year payment was £0.33. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

We Could See City of London Investment Group's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. City of London Investment Group has seen EPS rising for the last five years, at 7.1% per annum. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Our Thoughts On City of London Investment Group's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about City of London Investment Group's payments, as there could be some issues with sustaining them into the future. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for City of London Investment Group that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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