CLS Holdings' (LON:CLI) Dividend Will Be UK£0.024

By
Simply Wall St
Published
August 13, 2021
LSE:CLI
Source: Shutterstock

The board of CLS Holdings plc (LON:CLI) has announced that it will pay a dividend of UK£0.024 per share on the 24th of September. Based on this payment, the dividend yield on the company's stock will be 3.0%, which is an attractive boost to shareholder returns.

View our latest analysis for CLS Holdings

CLS Holdings' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by CLS Holdings' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to fall by 33.2%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 73%, which is comfortable for the company to continue in the future.

historic-dividend
LSE:CLI Historic Dividend August 14th 2021

CLS Holdings Is Still Building Its Track Record

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The first annual payment during the last 4 years was UK£0.058 in 2017, and the most recent fiscal year payment was UK£0.075. This implies that the company grew its distributions at a yearly rate of about 7.0% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider CLS Holdings to be a consistent dividend paying stock.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though CLS Holdings' EPS has declined at around 6.0% a year. 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.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, CLS Holdings has 4 warning signs (and 1 which is a bit concerning) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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