Gram Car Carriers' (OB:GCC) Shareholders Will Receive A Bigger Dividend Than Last Year

Gram Car Carriers ASA (OB:GCC) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of November to $7.19. Despite this raise, the dividend yield of 9.8% is only a modest boost to shareholder returns.

Check out our latest analysis for Gram Car Carriers

Gram Car Carriers Is Paying Out More Than It Is Earning

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Gram Car Carriers' dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next 12 months is set to see EPS grow by 168.6%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Gram Car Carriers Doesn't Have A Long Payment History

The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Gram Car Carriers will be very happy to have seen its EPS grow by 1,035% in just the last 12 months. It's nice to see earnings per share rising, but one year is too short a period to get excited about. Were this trend to continue, we'd be interested. Gram Car Carriers is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future. We do note though, one year is too short a time to be drawing strong conclusions about a company's future prospects.

We Really Like Gram Car Carriers' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Gram Car Carriers that investors should know about before committing capital to this stock. 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.