Centaur Media (LON:CAU) Will Pay A Larger Dividend Than Last Year At £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 takes the dividend yield to 6.1%, which shareholders will be pleased with.

View our latest analysis for Centaur Media

Centaur Media's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Centaur Media was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 78% indicates it is more focused on returning cash to shareholders than growing the business.

Looking forward, earnings per share could rise by 82.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. There hasn't been much of a change in the dividend over the last 10 years. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Centaur Media has grown earnings per share 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.

In Summary

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 would probably look elsewhere for an income investment.

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 2 warning signs for Centaur Media that investors should take into consideration. Is Centaur Media not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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