Stock Analysis

GWA Group (ASX:GWA) Is Paying Out A Larger Dividend Than Last Year

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ASX:GWA
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GWA Group Limited (ASX:GWA) has announced that it will be increasing its dividend on the 6th of October to AU$0.065. This takes the dividend yield from 4.7% to 4.7%, which shareholders will be pleased with.

See our latest analysis for GWA Group

GWA Group's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by GWA Group's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Earnings per share is forecast to rise by 1.8% over the next year. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 92%, which is on the higher side, but certainly still feasible.

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ASX:GWA Historic Dividend August 18th 2021

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the dividend has gone from AU$0.20 to AU$0.13. This works out to be a decline of approximately 4.5% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that GWA Group's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On GWA Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think GWA Group's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for GWA Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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