We Wouldn't Be Too Quick To Buy Centuria Capital Group (ASX:CNI) Before It Goes Ex-Dividend

Simply Wall St

Centuria Capital Group (ASX:CNI) stock is about to trade ex-dividend in . If you purchase the stock on or after the 29th of June, you won't be eligible to receive this dividend, when it is paid on the 8th of July.

Centuria Capital Group's next dividend payment will be AU$0.052 per share, and in the last 12 months, the company paid a total of AU$0.095 per share. Looking at the last 12 months of distributions, Centuria Capital Group has a trailing yield of approximately 5.1% on its current stock price of A$1.885. If you buy this business for its dividend, you should have an idea of whether Centuria Capital Group's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Centuria Capital Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Centuria Capital Group distributed an unsustainably high 188% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.

When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

ASX:CNI Historic Dividend June 29th 2020

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Centuria Capital Group's earnings per share have fallen at approximately 15% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

We'd also point out that Centuria Capital Group issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, ten years ago, Centuria Capital Group has lifted its dividend by approximately 6.9% a year on average. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Centuria Capital Group is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.

Final Takeaway

Is Centuria Capital Group an attractive dividend stock, or better left on the shelf? Earnings per share are in decline and Centuria Capital Group is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in Centuria Capital Group despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, Centuria Capital Group has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.