Global Ship Lease (NYSE:GSL) Is Increasing Its Dividend To $0.45

The board of Global Ship Lease, Inc. (NYSE:GSL) has announced that it will be paying its dividend of $0.45 on the 4th of September, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 6.7%, which is fairly typical for the industry.

See our latest analysis for Global Ship Lease

Global Ship Lease's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Global Ship Lease's 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.

EPS is set to fall by 19.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 22%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Global Ship Lease's Dividend Has Lacked Consistency

Looking back, Global Ship Lease's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2015, the annual payment back then was $3.20, compared to the most recent full-year payment of $1.80. This works out to be a decline of approximately 6.2% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that Global Ship Lease has grown earnings per share at 52% 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.

We Really Like Global Ship Lease's Dividend

Overall, a dividend increase is always good, and we think that Global Ship Lease is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Global Ship Lease (of which 1 is potentially serious!) you should know about. 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.