The board of CTI Logistics Limited (ASX:CLX) has announced that it will pay a dividend on the 4th of April, with investors receiving A$0.05 per share. Based on this payment, the dividend yield on the company's stock will be 6.3%, which is an attractive boost to shareholder returns.

Check out our latest analysis for CTI Logistics

CTI Logistics' Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last payment was quite easily covered by earnings, but it made up 96% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 46.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from A$0.08 total annually to A$0.11. This means that it has been growing its distributions at 3.2% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that CTI Logistics has grown earnings per share at 71% per year over the past five years. CTI Logistics is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On CTI Logistics' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think CTI Logistics is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for CTI Logistics that you should be aware of before investing. Is CTI Logistics not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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