Yahoo Finance Collins Foods (ASX:CKF) Will Pay A Dividend Of A$0.12
Collins Foods Limited (ASX:CKF) has announced that it will pay a dividend of A$0.12 per share on the 29th of December. The dividend yield will be 3.5% based on this payment which is still above the industry average.
View our latest analysis for Collins Foods
Collins Foods' Dividend Is Well Covered By Earnings
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment made up 80% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.
The next year is set to see EPS grow by 87.8%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 47% which would be quite comfortable going to take the dividend forward.
Collins Foods Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2012, the annual payment back then was A$0.065, compared to the most recent full-year payment of A$0.27. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
We Could See Collins Foods' Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. Collins Foods has seen EPS rising for the last five years, at 7.2% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.
In Summary
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Collins Foods that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
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