Clientèle's (JSE:CLI) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Clientèle Limited (JSE:CLI) has announced that it will be paying its dividend of ZAR1.25 on the 26th of September, an increased payment from last year's comparable dividend. This will take the annual payment to 9.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Clientèle

Clientèle's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Clientèle was paying out quite a large proportion of both earnings and cash flow, with the dividend being 257% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

If the company can't turn things around, EPS could fall by 0.2% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 90%, meaning that most of the company's earnings is being paid out to shareholders.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ZAR0.74 in 2013 to the most recent total annual payment of ZAR1.25. This means that it has been growing its distributions at 5.4% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Clientèle's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Clientèle's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Clientèle that investors need to be conscious of moving forward. 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.