G5 Entertainment (STO:G5EN) Is Paying Out A Dividend Of SEK8.00

G5 Entertainment AB (publ)'s (STO:G5EN) investors are due to receive a payment of SEK8.00 per share on 19th of June. Based on this payment, the dividend yield on the company's stock will be 5.9%, which is an attractive boost to shareholder returns.

View our latest analysis for G5 Entertainment

G5 Entertainment's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, G5 Entertainment's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 11.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 61%, which is in the range that makes us comfortable with the sustainability of the dividend.

G5 Entertainment Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 7 years was SEK0.75 in 2017, and the most recent fiscal year payment was SEK8.00. This implies that the company grew its distributions at a yearly rate of about 40% over that duration. G5 Entertainment has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, G5 Entertainment's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 2.0% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On G5 Entertainment's Dividend

Overall, a consistent dividend is a good thing, and we think that G5 Entertainment has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for G5 Entertainment that investors should know about before committing capital to this stock. Is G5 Entertainment not quite the opportunity you were looking for? Why not check out our selection of top 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.