A deep dive into the company's dividend performance and its sustainability
Carsales.com Ltd (CSXXY, Financial) recently announced a dividend of $0.42 per share, payable on October 30, 2023, with the ex-dividend date set for September 15, 2023. As investors anticipate this forthcoming payment, attention also focuses on the company's dividend history, yield, and growth rates. Using data from GuruFocus, let's delve into Carsales.com Ltd's dividend performance and assess its sustainability.
About Carsales.com Ltd
Carsales.com Ltd is a technology enterprise operating in the motor vehicles sector. Its principal business is its Australian online marketplace for automotive, www.carsales.com.au, which is the leading online automotive marketplace in Australia. Carsales.com Ltd also owns and operates businesses in various geographic, category, and product adjacencies, including online marketplaces for automotive in South Korea and Latin America, non-automotive online marketplaces in Australia and the United States, and data and replacement parts businesses.
Carsales.com Ltd's Dividend History
Since 2014, Carsales.com Ltd has maintained a consistent dividend payment record, with dividends currently distributed bi-annually. The following chart shows the annual Dividends Per Share for tracking historical trends.
Understanding Carsales.com Ltd's Dividend Yield and Growth
As of the present, Carsales.com Ltd has a 12-month trailing dividend yield of 1.89% and a 12-month forward dividend yield of 2.20%. This implies an expectation of increased dividend payments over the next 12 months. However, Carsales.com Ltd's dividend yield of 1.89% is near a 10-year low and underperforms 53.5% of global competitors in the Interactive Media industry, suggesting that the company's dividend yield may not be a compelling proposition for income investors.
Over the past three years, Carsales.com Ltd's annual dividend growth rate was 5.60%. This rate decreased to 5.10% per year when extended to a five-year horizon. Over the past decade, Carsales.com Ltd's annual dividends per share growth rate stands at 7.20%. Based on Carsales.com Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of Carsales.com Ltd stock as of today is approximately 2.42%.
Assessing Dividend Sustainability: Payout Ratio and Profitability
The dividend payout ratio is a critical metric in assessing the sustainability of the dividend. It provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, ensuring the availability of funds for future growth and unexpected downturns. As of June 30, 2023, Carsales.com Ltd's dividend payout ratio is 0.29.
Carsales.com Ltd's profitability rank of 9 out of 10 suggests good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.
Future Outlook: Growth Metrics
Carsales.com Ltd's growth rank of 9 out of 10 suggests a good growth trajectory relative to its competitors. The company's revenue per share and 3-year revenue growth rate indicate a strong revenue model, with revenue increasing by approximately 12.60% per year on average, a rate that outperforms approximately 59.42% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Carsales.com Ltd's earnings increased by approximately 57.40% per year on average, a rate that outperforms approximately 87.84% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 15.10% outperforms approximately 46.46% of global competitors.
Conclusion
Despite a lower dividend yield compared to its global competitors, Carsales.com Ltd maintains a steady dividend growth rate, a low payout ratio, and high profitability. These factors, combined with its robust growth metrics, suggest that Carsales.com Ltd's dividends are sustainable in the long term. However, investors should continue to monitor these metrics to ensure the company's financial health and its ability to maintain its dividend payments.
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