City of London Investment Group (LON:CLIG) Has Announced A Dividend Of $0.11

The board of City of London Investment Group Plc (LON:CLIG) has announced that it will pay a dividend of $0.11 per share on the 3rd of April. The dividend yield will be 8.8% based on this payment which is still above the industry average.

View our latest analysis for City of London Investment Group

City of London Investment Group's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 84% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

The next year is set to see EPS grow by 28.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 72%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

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 $0.386 in 2015, and the most recent fiscal year payment was $0.402. Dividend payments have been growing, but very slowly over the period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Come By

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that City of London Investment Group's earnings per share has fallen at approximately 6.3% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

City of London Investment Group's Dividend Doesn't Look Sustainable

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 track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for City of London Investment Group that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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