Global Payments (NYSE:GPN) Will Pay A Dividend Of $0.25

The board of Global Payments Inc. (NYSE:GPN) has announced that it will pay a dividend of $0.25 per share on the 27th of September. Based on this payment, the dividend yield will be 1.0%, which is fairly typical for the industry.

Check out our latest analysis for Global Payments

Global Payments' Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Global Payments' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 57.2% over the next year. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.04 in 2014 to the most recent total annual payment of $1.00. This works out to be a compound annual growth rate (CAGR) of approximately 38% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

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. Global Payments has impressed us by growing EPS at 13% per year over the past five years. Global Payments definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Global Payments Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Global Payments that you should be aware of before investing. Is Global Payments not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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