The board of Gray Television, Inc. (NYSE:GTN.A) has announced that it will pay a dividend on the 30th of June, with investors receiving US$0.08 per share. This payment means the dividend yield will be 1.8%, which is below the average for the industry.
Check out our latest analysis for Gray Television
Gray Television's Earnings Easily Cover the Distributions
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Gray Television's 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.
Unless the company can turn things around, EPS could fall by 6.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 53%, which is definitely feasible to continue.
Gray Television Doesn't Have A Long Payment History
Without a track record of dividend payments, we can't make a judgement on how stable it 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.
Dividend Growth Is Doubtful
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Over the past five years, it looks as though Gray Television's EPS has declined at around 6.2% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Gray Television's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 5 warning signs for Gray Television (1 can't be ignored!) that you should be aware of before investing. 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.
About NYSE:GTN.A
Gray Television
A television broadcasting company, owns and/or operates television stations and digital assets in the United States.
Undervalued with proven track record and pays a dividend.
