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The board of Celebrus Technologies plc (LON:CLBS) has announced that the dividend on 16th of August will be increased to £0.0223, which will be 3.7% higher than last year's payment of £0.0215 which covered the same period. Despite this raise, the dividend yield of 1.2% is only a modest boost to shareholder returns.
View our latest analysis for Celebrus Technologies
Celebrus Technologies' Earnings Easily Cover The Distributions
While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Celebrus Technologies was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 33.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, 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. Since 2014, the annual payment back then was £0.016, compared to the most recent full-year payment of £0.0315. This works out to be a compound annual growth rate (CAGR) of approximately 7.0% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
Dividend Growth May Be Hard To Come By
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Celebrus Technologies' EPS has declined at around 7.1% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
In Summary
Overall, we always like to see the dividend being raised, but we don't think Celebrus Technologies will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.
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. Are management backing themselves to deliver performance? Check their shareholdings in Celebrus Technologies in our latest insider ownership analysis. Is Celebrus Technologies not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.