GO p.l.c. (MTSE:GO) has announced it will be reducing its dividend payable on the 27th of May to €0.09. The dividend yield will be in the average range for the industry at 5.0%.
View our latest analysis for GO
GO Doesn't Earn Enough To Cover Its Payments
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, the company was paying out 164% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
If the company can't turn things around, EPS could fall by 11.7% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 208%, which is definitely a bit high to be sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from €0.05 in 2012 to the most recent annual payment of €0.18. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. GO has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. 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 isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, GO has 3 warning signs (and 2 which are a bit unpleasant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of 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.
About MTSE:GO
Solid track record and fair value.
