In a notable shift for shareholders, CI Financial Corp. (TSE: CIX) has announced an increase in its quarterly dividend to CA$0.20 per share, a move set to enhance its dividend yield to an appealing 5.8% when payments commence on January 15th. This decision marks a significant change from the company's previous history of dividend cuts and declining earnings per share.
CI Financial's dividend history has been characterized by variability, with annual payouts decreasing from CA$1.02 in 2013 to CA$0.80 in the most recent fiscal year, reflecting an average annual decline of about 2.4%. Additionally, the company's earnings per share have experienced a downward trend, falling by 25% over the past five years. These factors have cast doubts on the sustainability of its dividends.
However, despite past reductions and lower profits compared to dividends before today's announcement, CI Financial has managed to maintain adequate free cash flow coverage for its payouts. Looking ahead, analysts are projecting a significant increase in earnings per share for the next year which, if the current dividend pattern holds, could result in a manageable payout ratio of around 19%.
While today's dividend hike offers a more attractive yield to investors, it comes against a backdrop of CI Financial's historically unstable dividends and declining earnings. The market generally favors consistent and reliable dividend policies, so although the forecast for next year is optimistic with expected rising earnings, investors may remain cautious given the company's track record.
InvestingPro Insights
Our InvestingPro data indicates that CI Financial Corp. has a market capitalization of 242.33M USD and a P/E ratio of 11.17 as of Q3 2023. The company's revenue for the last twelve months as of Q3 2023 stands at 158.09M USD, with a Gross Profit Margin of 29.57%.
Two key InvestingPro Tips for CI Financial Corp. are worth noting. Firstly, the company has a high earnings quality, with free cash flow exceeding net income. This aligns with the article's observation that CI Financial has maintained adequate free cash flow coverage for its dividend payouts. Secondly, despite a declining trend in earnings per share, analysts are optimistic about the company's profitability this year.
For more insights and tips, consider exploring InvestingPro's wealth of resources, including over 10 additional tips for CI Financial Corp. These could be instrumental in making informed investment decisions.
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