Cliq Digital AG (ETR:CLIQ) has announced that it will be increasing its dividend from last year's comparable payment on the 13th of April to €1.79. This will take the annual payment to 6.0% of the stock price, which is above what most companies in the industry pay.
See our latest analysis for Cliq Digital
Cliq Digital's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Cliq Digital was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 82% indicates it is more focused on returning cash to shareholders than growing the business.
Over the next year, EPS is forecast to expand by 73.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.
Cliq Digital Is Still Building Its Track Record
The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The dividend has gone from an annual total of €0.14 in 2020 to the most recent total annual payment of €1.79. This works out to be a compound annual growth rate (CAGR) of approximately 134% a year over that time. Cliq Digital has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Cliq Digital has been growing its earnings per share at 53% a year over the past five years. Cliq Digital is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
Our Thoughts On Cliq Digital's Dividend
In summary, while it's always good to see the dividend being raised, we don't think Cliq Digital's payments are rock solid. While Cliq Digital is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.
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. Just as an example, we've come across 2 warning signs for Cliq Digital you should be aware of, and 1 of them is concerning. Is Cliq Digital not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.