Calgro M3 Holdings (JSE:CGR) Has Announced That Its Dividend Will Be Reduced To ZAR0.0864

The board of Calgro M3 Holdings Limited (JSE:CGR) has announced that the dividend on 2nd of June will be reduced by 9.0% from last year's ZAR0.0949 to ZAR0.0864. Based on this payment, the dividend yield will be 1.9%, which is lower than the average for the industry.

Our free stock report includes 3 warning signs investors should be aware of before investing in Calgro M3 Holdings. Read for free now.

Calgro M3 Holdings' Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Calgro M3 Holdings' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 84.7% over the next year. If the dividend continues on this path, the payout ratio could be 2.5% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Calgro M3 Holdings

Calgro M3 Holdings Is Still Building Its Track Record

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Calgro M3 Holdings has grown earnings per share at 114% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Calgro M3 Holdings Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Calgro M3 Holdings does. The cut will allow the company to continue paying out the dividend without putting the balance sheet under pressure, which means that it could remain sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Calgro M3 Holdings has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Calgro M3 Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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