Yahoo Finance Does Cleanaway Waste Management Limited (ASX:CWY) Have A Place In Your Dividend Stock Portfolio?
Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Cleanaway Waste Management Limited (ASX:CWY) has been paying a dividend to shareholders. Today it yields 1.6%. Does Cleanaway Waste Management tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
View our latest analysis for Cleanaway Waste Management
5 questions to ask before buying a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is their annual yield among the top 25% of dividend payers?
Has it paid dividend every year without dramatically reducing payout in the past?
Has it increased its dividend per share amount over the past?
Is is able to pay the current rate of dividends from its earnings?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Cleanaway Waste Management pass our checks?
The company currently pays out 45% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. Going forward, analysts expect CWY’s payout to increase to 51% of its earnings, which leads to a dividend yield of around 2.4%. In addition to this, EPS should increase to A$0.059. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Dividend payments from Cleanaway Waste Management have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. This means that dividend hunters should probably steer clear of the stock, at least for now until the track record improves.
In terms of its peers, Cleanaway Waste Management generates a yield of 1.6%, which is on the low-side for Commercial Services stocks.
Next Steps:
After digging a little deeper into Cleanaway Waste Management’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three important factors you should further research:
Future Outlook: What are well-informed industry analysts predicting for CWY’s future growth? Take a look at our free research report of analyst consensus for CWY’s outlook.
Valuation: What is CWY worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CWY is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
