CDL Investments New Zealand (NZSE:CDI) Will Pay A Dividend Of NZ$0.0412

The board of CDL Investments New Zealand Limited (NZSE:CDI) has announced that it will pay a dividend on the 12th of May, with investors receiving NZ$0.0412 per share. Based on this payment, the dividend yield will be 4.7%, which is fairly typical for the industry.

Check out our latest analysis for CDL Investments New Zealand

CDL Investments New Zealand's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, CDL Investments New Zealand's dividend was only 32% of earnings, however it was paying out 103% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

EPS is set to fall by 1.4% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 40%, which is definitely feasible to continue.

CDL Investments New Zealand Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was NZ$0.017 in 2013, and the most recent fiscal year payment was NZ$0.035. This works out to be a compound annual growth rate (CAGR) of approximately 7.5% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Unfortunately, CDL Investments New Zealand's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On CDL Investments New Zealand's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for CDL Investments New Zealand (of which 1 doesn't sit too well with us!) you should know about. 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.