Clientèle Limited, listed on the Johannesburg Stock Exchange (JSE:CLI), announced on Wednesday an increase in its annual dividend payout, set to take effect on September 26. The new dividend will be ZAR1.25, raising the annual payout to 9.8% of the stock price, a rate that surpasses most companies in the industry.
However, the company's ability to maintain these payments is under question. Prior to this announcement, Clientèle was distributing an alarming 257% of its cash flows as dividends. This could potentially lead to a reduction in the dividend if cash flows decrease.
The future earnings per share (EPS) might also impact the dividend payout. Analysts predict that if Clientèle's performance doesn't improve, EPS might drop by 0.2% in the coming year. If the dividend continues on its recent trajectory, it is projected that the payout ratio could reach as high as 90%, meaning nearly all of the company's earnings would be distributed to shareholders.
Clientèle has a history of inconsistent dividends, having reduced them at least once in the past decade. In 2013, the annual payment was ZAR0.74 compared to the most recent full-year payment of ZAR1.25, indicating an average annual growth rate of about 5.4% over this period. However, given past cuts, investors are advised to proceed with caution despite promising growth.
The company's ability to grow dividends in future is uncertain due to past cuts and stagnant earnings per share over the last five years. This lack of growth could diminish the purchasing power of future dividends.
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