City of London Investment Group's (LON:CLIG) Dividend Will Be £0.22

The board of City of London Investment Group PLC (LON:CLIG) has announced that it will pay a dividend on the 4th of November, with investors receiving £0.22 per share. This means the annual payment is 7.9% of the current stock price, which is above the average for the industry.

See our latest analysis for City of London Investment Group

City of London Investment Group Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment made up 77% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 18.7% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 141%, which could put the dividend under pressure if earnings don't start to improve.

City of London Investment Group Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was £0.24, compared to the most recent full-year payment of £0.33. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

The Dividend Has Growth Potential

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. 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

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 City of London Investment Group that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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