goeasy (TSE:GSY) Is Paying Out A Larger Dividend Than Last Year

goeasy Ltd. (TSE:GSY) has announced that it will be increasing its dividend from last year's comparable payment on the 12th of April to CA$1.17. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that goeasy's stock price has increased by 40% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for goeasy

goeasy's Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, goeasy's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 46.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

goeasy Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was CA$0.34, compared to the most recent full-year payment of CA$4.68. This implies that the company grew its distributions at a yearly rate of about 30% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. goeasy has impressed us by growing EPS at 32% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On goeasy's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While goeasy is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

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. Just as an example, we've come across 4 warning signs for goeasy you should be aware of, and 2 of them are a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.