The board of Clover Corporation Limited (ASX:CLV) has announced that it will be increasing its dividend by 50% on the 27th of April to A$0.0075, up from last year's comparable payment of A$0.005. Even though the dividend went up, the yield is still quite low at only 1.6%.

See our latest analysis for Clover

Clover's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Clover was paying only paying out a fraction of earnings, but the payment was a massive 105% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 37.7% over the next year. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward. historic-dividend

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was A$0.0175, compared to the most recent full-year payment of A$0.02. This works out to be a compound annual growth rate (CAGR) of approximately 1.3% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

We Could See Clover's Dividend Growing

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. Clover has impressed us by growing EPS at 8.4% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Clover's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Clover's payments are rock solid. While Clover is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.



It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Now, if you want to look closer, it would be worth checking out our free research on Clover management tenure, salary, and performance. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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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