The Great Eastern Shipping Company Limited (NSE:GESHIP) Passed Our Checks, And It's About To Pay A ₹7.20 Dividend

The Great Eastern Shipping Company Limited (NSE:GESHIP) stock is about to trade ex-dividend in 2 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase Great Eastern Shipping's shares before the 13th of November in order to be eligible for the dividend, which will be paid on the 7th of December.

The company's next dividend payment will be ₹7.20 per share. Last year, in total, the company distributed ₹29.70 to shareholders. Last year's total dividend payments show that Great Eastern Shipping has a trailing yield of 2.7% on the current share price of ₹1085.20. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Great Eastern Shipping has a low and conservative payout ratio of just 9.4% of its income after tax. A useful secondary check can be to evaluate whether Great Eastern Shipping generated enough free cash flow to afford its dividend. It paid out 23% of its free cash flow as dividends last year, which is conservatively low.

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.

See our latest analysis for Great Eastern Shipping

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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Great Eastern Shipping has grown its earnings rapidly, up 59% a year for the past five years. Great Eastern Shipping earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Great Eastern Shipping has lifted its dividend by approximately 10% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has Great Eastern Shipping got what it takes to maintain its dividend payments? 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. Overall we think this is an attractive combination and worthy of further research.

So while Great Eastern Shipping looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 2 warning signs for Great Eastern Shipping that we recommend you consider before investing in the business.

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.

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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.