Yahoo Finance Craneware (LON:CRW) Has Announced A Dividend Of $0.13
The board of Craneware plc (LON:CRW) has announced that it will pay a dividend on the 15th of April, with investors receiving $0.13 per share. This takes the dividend yield to 1.3%, which shareholders will be pleased with.
View our latest analysis for Craneware
Craneware's Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 138% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 26%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.
Over the next year, EPS is forecast to expand by 69.5%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 68% which would be quite comfortable going to take the dividend forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from $0.174 total annually to $0.353. This works out to be a compound annual growth rate (CAGR) of approximately 7.3% 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.
The Dividend Has Limited Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Craneware's EPS has declined at around 16% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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.
Craneware's Dividend Doesn't Look Sustainable
In summary, while it's always good to see the dividend being raised, we don't think Craneware's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Given that earnings are not growing, the dividend does not look nearly so attractive. Very few businesses see earnings consistently shrink year after year in perpetuity though, and so it might be worth seeing what the 4 analysts we track are forecasting for the future. Is Craneware not quite the opportunity you were looking for? Why not check out our selection of top 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.
