GlobalData (LON:DATA) Will Pay A Larger Dividend Than Last Year At UK£0.061

The board of GlobalData Plc (LON:DATA) has announced that the dividend on 1st of October will be increased to UK£0.061, which will be 13% higher than last year. Even though the dividend went up, the yield is still quite low at only 1.1%.

See our latest analysis for GlobalData

GlobalData's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before this announcement, GlobalData was paying out 73% of earnings, but a comparatively small 43% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Earnings per share is forecast to rise by 14.3% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 80% which is a bit high but can definitely be sustainable.

GlobalData Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. Since 2016, the first annual payment was UK£0.025, compared to the most recent full-year payment of UK£0.17. This means that it has been growing its distributions at 47% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that GlobalData has grown earnings per share at 58% per year over the past five years. However, GlobalData isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

We Really Like GlobalData's Dividend

Overall, a dividend increase is always good, and we think that GlobalData is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for GlobalData 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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