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Cedar Woods Properties Limited (ASX:CWP) is set to increase its upcoming dividend payment. On the 25th of October, the company will raise its dividend to A$0.17, higher than last year’s comparable payment. This brings the annual dividend yield to approximately 4.4%, which is above the industry average.
Strong Dividend Coverage Supported by Earnings Growth
While an attractive dividend yield is always appealing, the sustainability of that dividend matters most. Cedar Woods Properties, an ASX dividend stock, has demonstrated that it is comfortably earning enough to cover its dividend payments, indicating a balanced approach to retaining earnings for future growth while rewarding shareholders.
Looking ahead, earnings per share (EPS) for the company are forecast to grow by 45.5% over the next year. If this growth trend continues, the payout ratio could sit at 34% by next year, suggesting that the dividend is likely to remain sustainable.
Dividend Stability
Cedar Woods Properties has a long history of paying dividends, but there have been some inconsistencies over the past decade. The annual payment in 2014 was A$0.27, compared to A$0.25 in the most recent fiscal year. This slow reduction in payments signals a possible challenge for long-term dividend growth, which could raise concerns for investors seeking steady returns.
Limited Prospects for Future Dividend Growth
Given the fluctuations in dividend payments, it's critical to assess the company’s earnings growth potential. Over the past five years, Cedar Woods Properties has seen a modest decline in earnings per share, falling at around 4.2% per year. This trend makes it less likely that the company will significantly increase its dividend unless it can reverse the decline in earnings. However, with projections showing earnings growth for the upcoming year, there is cautious optimism for improvement, but a consistent track record is yet to be established.
Conclusion on Cedar Woods Properties’ Dividend Outlook
While Cedar Woods Properties is raising its dividend for the short term, the long-term outlook for income investors remains uncertain. Although the company currently generates enough cash to comfortably cover its dividend, the past inconsistency in payments and the decline in earnings per share may cause some hesitation among dividend-focused investors.
Investors looking for a steady income stream might want to consider the company’s historical performance and watch for sustained earnings growth before making any decisions.
Before committing to any investment, it is crucial to take into account other factors that may influence the stock's performance. For example, Cedar Woods Properties has 2 warning signs that investors should be aware of. Additionally, dividend-focused investors might find value in exploring a curated list of high-yield dividend stocks.
