GlobalData's (LON:DATA) Shareholders Will Receive A Bigger Dividend Than Last Year

GlobalData Plc's (LON:DATA) dividend will be increasing from last year's payment of the same period to £0.077 on 7th of October. Despite this raise, the dividend yield of 1.9% is only a modest boost to shareholder returns.

See our latest analysis for GlobalData

GlobalData's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, GlobalData's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to rise by 112.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 56%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

GlobalData Is Still Building Its Track Record

It is great to see that GlobalData has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2015, the dividend has gone from £0.025 total annually to £0.209. This works out to be a compound annual growth rate (CAGR) of approximately 35% a year 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.

GlobalData's Dividend Might Lack Growth

The company's investors will be pleased to have been receiving dividend income for some time. GlobalData has impressed us by growing EPS at 41% per year over the past five years. 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for GlobalData that you should be aware of before investing. 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.