GlobalData (LON:DATA) Will Pay A Larger Dividend Than Last Year At £0.183

The board of GlobalData Plc (LON:DATA) has announced that it will be paying its dividend of £0.183 on the 28th of April, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 2.1%, which is fairly typical for the industry.

View our latest analysis for GlobalData

GlobalData's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, the company was paying out 96% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 49%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next year is set to see EPS grow by 144.2%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 48% which brings it into quite a comfortable range.

GlobalData Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of £0.025 in 2016 to the most recent total annual payment of £0.26. This means that it has been growing its distributions at 40% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

GlobalData's Dividend Might Lack Growth

The company's investors will be pleased to have been receiving dividend income for some time. GlobalData has seen EPS rising for the last five years, at 61% per annum. While EPS is growing rapidly, GlobalData paid out a very high 96% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

Our Thoughts On GlobalData's Dividend

Overall, we always like to see the dividend being raised, but we don't think GlobalData will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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. If you are a dividend investor, you might also want to look at our curated 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.