Centaur Media (LON:CAU) Has Announced That It Will Be Increasing Its Dividend To £0.012

The board of Centaur Media Plc (LON:CAU) has announced that it will be paying its dividend of £0.012 on the 24th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 4.7%, which is above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Centaur Media's stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Centaur Media

Centaur Media'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. The last dividend was quite comfortably covered by Centaur Media's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS could expand by 82.2% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 24%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The last annual payment of £0.024 was flat on the annual payment from10 years ago. 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.

The Dividend Looks Likely To Grow

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. Centaur Media has impressed us by growing EPS at 82% per year over the past five years. Centaur Media is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On Centaur Media's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Centaur Media's payments are rock solid. While Centaur Media is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We don't think Centaur Media is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for Centaur Media that investors need to be conscious of moving forward. 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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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.