GO p.l.c.'s (MTSE:GO) dividend is being reduced from last year's payment covering the same period to €0.06 on the 9th of September. The yield is still above the industry average at 5.9%.
View our latest analysis for GO
GO Doesn't Earn Enough To Cover Its Payments
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
EPS is set to fall by 11.7% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 194%, which is definitely a bit high to be sustainable going forward.
GO's Dividend Has Lacked Consistency
GO has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2013, the dividend has gone from €0.10 total annually to €0.18. This implies that the company grew its distributions at a yearly rate of about 6.7% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
Dividend Growth Potential Is Shaky
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though GO's EPS has declined at around 12% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.
GO's Dividend Doesn't Look Great
In summary, it's not great to see that the dividend is being cut, but it is probably understandable given that the current payment level was quite high. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.
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. Just as an example, we've come across 3 warning signs for GO you should be aware of, and 2 of them make us uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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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.
About MTSE:GO
Proven track record and fair value.
