Interested In Gamehost's (TSE:GH) Upcoming CA$0.05 Dividend? You Have Four Days Left

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Gamehost Inc. (TSE:GH) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Gamehost's shares before the 31st of December in order to be eligible for the dividend, which will be paid on the 15th of January.

The company's next dividend payment will be CA$0.05 per share, and in the last 12 months, the company paid a total of CA$0.48 per share. Last year's total dividend payments show that Gamehost has a trailing yield of 6.0% on the current share price of CA$10.05. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Gamehost

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Gamehost paid out 50% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 43% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Gamehost's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Gamehost paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Gamehost, with earnings per share up 6.4% on average over the last five years. Decent historical earnings per share growth suggests Gamehost has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Gamehost has seen its dividend decline 3.8% per annum on average over the past 10 years, which is not great to see. Gamehost is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

From a dividend perspective, should investors buy or avoid Gamehost? Earnings per share growth has been modest and Gamehost paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. To summarise, Gamehost looks okay on this analysis, although it doesn't appear a stand-out opportunity.

In light of that, while Gamehost has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Gamehost you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.