In This Article:
Games Workshop Group PLC (LON:GAW) will increase its dividend from last year's comparable payment on the 19th of May to £1.20. Based on this payment, the dividend yield for the company will be 1.7%, which is fairly typical for the industry.
See our latest analysis for Games Workshop Group
Games Workshop Group Doesn't Earn Enough To Cover Its Payments
We aren't too impressed by dividend yields unless they can be sustained over time. The last dividend was quite easily covered by Games Workshop Group's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Earnings per share is forecast to rise by 15.4% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 111%, which is a bit high and could start applying pressure to the balance sheet.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.63 in 2013, and the most recent fiscal year payment was £1.65. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Games Workshop Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Games Workshop Group has seen EPS rising for the last five years, at 19% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
Games Workshop Group Looks Like A Great Dividend Stock
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 5 analysts we track are forecasting for Games Workshop Group for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.