Global Industrial (NYSE:GIC) Will Pay A Larger Dividend Than Last Year At US$0.18

By
Simply Wall St
Published
May 07, 2022
NYSE:GIC
Source: Shutterstock

Global Industrial Company (NYSE:GIC) has announced that it will be increasing its dividend on the 23rd of May to US$0.18. This will take the annual payment from 2.1% to 5.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Global Industrial

Global Industrial's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Global Industrial was paying only paying out a fraction of earnings, but the payment was a massive 244% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Earnings per share is forecast to rise by 5.2% over the next year. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 85%, which is on the higher side, but certainly still feasible.

historic-dividend
NYSE:GIC Historic Dividend May 7th 2022

Global Industrial Is Still Building Its Track Record

It is great to see that Global Industrial has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from US$0.20 in 2016 to the most recent annual payment of US$0.72. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

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. We are encouraged to see that Global Industrial has grown earnings per share at 27% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Global Industrial is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Global Industrial (of which 1 is potentially serious!) you should know about. Is Global Industrial not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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