Why You Might Be Interested In Geneva Finance Limited (NZSE:GFL) For Its Upcoming Dividend

It looks like Geneva Finance Limited (NZSE:GFL) is about to go ex-dividend in the next four days. Ex-dividend means that investors that purchase the stock on or after the 10th of December will not receive this dividend, which will be paid on the 15th of December.

Geneva Finance's upcoming dividend is NZ$0.013 a share, following on from the last 12 months, when the company distributed a total of NZ$0.028 per share to shareholders. Based on the last year's worth of payments, Geneva Finance has a trailing yield of 5.6% on the current stock price of NZ$0.495. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Geneva Finance

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Geneva Finance paid out a comfortable 38% of its profit last year.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Geneva Finance paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Geneva Finance's earnings per share have been growing at 17% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past four years, Geneva Finance has increased its dividend at approximately 8.3% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has Geneva Finance got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Geneva Finance ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

So while Geneva Finance looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Our analysis shows 3 warning signs for Geneva Finance that we strongly recommend you have a look at before investing in the company.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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