Gamma Communications (LON:GAMA) Is Increasing Its Dividend To £0.13

Gamma Communications plc (LON:GAMA) has announced that it will be increasing its dividend from last year's comparable payment on the 19th of June to £0.13. This takes the annual payment to 1.6% of the current stock price, which unfortunately is below what the industry is paying.

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Gamma Communications' Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Gamma Communications was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 24.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

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Gamma Communications Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was £0.0395 in 2015, and the most recent fiscal year payment was £0.195. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Gamma Communications has seen EPS rising for the last five years, at 15% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Gamma Communications' Dividend

Overall, a dividend increase is always good, and we think that Gamma Communications is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 8 Gamma Communications analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Gamma Communications not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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