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The board of Centaur Media Plc (LON:CAU) has announced that it will pay a dividend on the 26th of May, with investors receiving £0.006 per share. Including this payment, the dividend yield on the stock will be 2.4%, which is a modest boost for shareholders' returns.
Check out our latest analysis for Centaur Media
Centaur Media Doesn't Earn Enough To Cover Its Payments
If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Centaur Media was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
The next 12 months is set to see EPS grow by 84.9%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 128% over the next year.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of £0.0225 in 2013 to the most recent total annual payment of £0.012. This works out to be a decline of approximately 6.1% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Looks Likely To Grow
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that Centaur Media has grown earnings per share at 51% per year over the past five years. Centaur Media is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Centaur Media Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.
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. As an example, we've identified 2 warning signs for Centaur Media that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.