Games Workshop Group (LON:GAW) Has Announced That It Will Be Increasing Its Dividend To £1.20

Games Workshop Group PLC (LON:GAW) will increase its dividend from last year's comparable payment on the 19th of May to £1.20. This takes the annual payment to 1.8% of the current stock price, which is about average for the industry.

See our latest analysis for Games Workshop Group

Games Workshop Group Is Paying Out More Than It Is Earning

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Games Workshop Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 15.4%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 111%, which probably can't continue without putting some pressure on the balance sheet.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of £0.63 in 2013 to the most recent total annual payment of £1.65. This means that it has been growing its distributions at 10% per annum over that time. Games Workshop Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Games Workshop Group has grown earnings per share at 19% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like Games Workshop Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 5 Games Workshop Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Games Workshop Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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