The Great Eastern Shipping Company Limited (NSE:GESHIP) Looks Interesting, And It's About To Pay A Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that The Great Eastern Shipping Company Limited (NSE:GESHIP) is about to go ex-dividend in just three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Great Eastern Shipping's shares on or after the 13th of August will not receive the dividend, which will be paid on the 31st of August.

The company's next dividend payment will be ₹9.00 per share, and in the last 12 months, the company paid a total of ₹28.80 per share. Based on the last year's worth of payments, Great Eastern Shipping stock has a trailing yield of around 2.1% on the current share price of ₹1358.55. If you buy this business for its dividend, you should have an idea of whether Great Eastern Shipping's dividend is reliable and sustainable. As a result, readers should always check whether Great Eastern Shipping has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Great Eastern Shipping

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Great Eastern Shipping is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. The good news is it paid out just 20% of its free cash flow in the last year.

It's positive to see that Great Eastern Shipping's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Great Eastern Shipping paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Great Eastern Shipping's earnings have been skyrocketing, up 44% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Great Eastern Shipping looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Great Eastern Shipping has delivered 14% 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.

To Sum It Up

Should investors buy Great Eastern Shipping for the upcoming dividend? It's great that Great Eastern Shipping is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Great Eastern Shipping looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Great Eastern Shipping has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for Great Eastern Shipping that we strongly recommend you have a look at before investing in the company.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.