Games Workshop Group PLC (LON:GAW) Goes Ex-Dividend Soon

Games Workshop Group PLC (LON:GAW) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 17th of December will not receive this dividend, which will be paid on the 25th of January.

Games Workshop Group's next dividend payment will be UK£0.60 per share, and in the last 12 months, the company paid a total of UK£1.45 per share. Based on the last year's worth of payments, Games Workshop Group has a trailing yield of 1.4% on the current stock price of £102.1. If you buy this business for its dividend, you should have an idea of whether Games Workshop Group's dividend is reliable and sustainable. So we need to investigate whether Games Workshop Group can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Games Workshop Group

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Games Workshop Group is paying out an acceptable 66% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 59% of its free cash flow as dividends, within the usual range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Games Workshop Group has grown its earnings rapidly, up 42% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Games Workshop Group has delivered 19% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is Games Workshop Group an attractive dividend stock, or better left on the shelf? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Games Workshop Group's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 66% and 59% respectively. All things considered, we are not particularly enthused about Games Workshop Group from a dividend perspective.

Ever wonder what the future holds for Games Workshop Group? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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