Gowing Bros (ASX:GOW) Is Paying Out A Dividend Of A$0.03

Gowing Bros. Limited (ASX:GOW) has announced that it will pay a dividend of A$0.03 per share on the 29th of April. This means that the annual payment will be 3.1% of the current stock price, which is in line with the average for the industry.

Gowing Bros Might Find It Hard To Continue The Dividend

Unless the payments are sustainable, the dividend yield doesn't mean too much. Despite not generating a profit, Gowing Bros is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Looking forward, earnings per share could 18.8% over the next year if the trend of the last few years can't be broken. This means the company will be unprofitable and managers could face the tough choice between continuing to pay the dividend or taking pressure off the balance sheet.

See our latest analysis for Gowing Bros

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the dividend has gone from A$0.109 total annually to A$0.069. Doing the maths, this is a decline of about 4.5% per year. 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 Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Over the past five years, it looks as though Gowing Bros' EPS has declined at around 19% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Gowing Bros' Dividend Doesn't Look Great

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Gowing Bros make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

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 identified 4 warning signs for Gowing Bros (3 don't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.