Income Investors Should Know That Great-West Lifeco Inc. (TSE:GWO) Goes Ex-Dividend Soon

By
Simply Wall St
Published
February 25, 2022
TSX:GWO
Source: Shutterstock

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Great-West Lifeco Inc. (TSE:GWO) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Great-West Lifeco's shares before the 2nd of March to receive the dividend, which will be paid on the 31st of March.

The company's upcoming dividend is CA$0.49 a share, following on from the last 12 months, when the company distributed a total of CA$1.96 per share to shareholders. Looking at the last 12 months of distributions, Great-West Lifeco has a trailing yield of approximately 5.2% on its current stock price of CA$37.99. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Great-West Lifeco

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Great-West Lifeco is paying out an acceptable 54% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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TSX:GWO Historic Dividend February 25th 2022

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Great-West Lifeco earnings per share are up 4.7% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Great-West Lifeco has delivered an average of 4.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Great-West Lifeco worth buying for its dividend? Great-West Lifeco has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.

Wondering what the future holds for Great-West Lifeco? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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