Centaur Media (LON:CAU) Is Paying Out A Larger Dividend Than Last Year

Centaur Media Plc (LON:CAU) will increase its dividend from last year's comparable payment on the 24th of May to £0.012. This will take the dividend yield to an attractive 5.8%, providing a nice boost to shareholder returns.

See our latest analysis for Centaur Media

Centaur Media's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Centaur Media's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Over the next year, EPS could expand by 82.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The payments haven't really changed that much since 10 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Centaur Media has seen EPS rising for the last five years, at 82% per annum. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Centaur Media could prove to be a strong dividend payer.

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. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Centaur Media has been making. Overall, we don't think this company has the makings of a good income stock.

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. As an example, we've identified 3 warning signs for Centaur Media that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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