CDL Investments New Zealand (NZSE:CDI) Has Announced A Dividend Of NZ$0.0412

CDL Investments New Zealand Limited (NZSE:CDI) has announced that it will pay a dividend of NZ$0.0412 per share on the 16th of May. This means that the annual payment will be 4.5% of the current stock price, which is in line with the average for the industry.

See our latest analysis for CDL Investments New Zealand

CDL Investments New Zealand's Projections Indicate Future Payments May Be Unsustainable

We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Looking forward, EPS could fall by 15.5% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 97%, which could put the dividend under pressure if earnings don't start to improve.

CDL Investments New Zealand Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from NZ$0.022 total annually to NZ$0.035. This works out to be a compound annual growth rate (CAGR) of approximately 4.8% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. CDL Investments New Zealand's earnings per share has shrunk at 16% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

CDL Investments New Zealand's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. 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 CDL Investments New Zealand that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.