Gateley (Holdings) (LON:GTLY) Will Pay A Dividend Of £0.062

The board of Gateley (Holdings) Plc (LON:GTLY) has announced that it will pay a dividend of £0.062 per share on the 14th of November. This makes the dividend yield 7.5%, which will augment investor returns quite nicely.

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Gateley (Holdings)'s Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 930% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we could see the payout ratio reach 300%, which is on the unsustainable side.

View our latest analysis for Gateley (Holdings)

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of £0.0379 in 2015 to the most recent total annual payment of £0.095. This means that it has been growing its distributions at 9.6% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Gateley (Holdings)'s EPS has fallen by approximately 37% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Gateley (Holdings)'s Dividend Doesn't Look Great

Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Gateley (Holdings) (1 can't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.