Collins Property Group (JSE:CPP) Will Pay A Larger Dividend Than Last Year At ZAR0.50

The board of Collins Property Group Limited (JSE:CPP) has announced that it will be paying its dividend of ZAR0.50 on the 18th of June, an increased payment from last year's comparable dividend. This takes the annual payment to 9.7% of the current stock price, which is about average for the industry.

Check out our latest analysis for Collins Property Group

Collins Property Group's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Collins Property Group's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share could rise by 35.2% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ZAR0.05 in 2014 to the most recent total annual payment of ZAR0.80. This works out to be a compound annual growth rate (CAGR) of approximately 32% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Collins Property Group has been growing its earnings per share at 35% a year over the past five years. Collins Property Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Collins Property Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Collins Property Group (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Collins Property Group not quite the opportunity you were looking for? Why not check out our selection of top 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.