Dividend Investors: Don't Be Too Quick To Buy GMP Capital Inc. (TSE:GMP) For Its Upcoming Dividend
GMP Capital Inc. (TSE:GMP) stock is about to trade ex-dividend in 4 days time. Ex-dividend means that investors that purchase the stock on or after the 13th of September will not receive this dividend, which will be paid on the 1st of October.
GMP Capital's next dividend payment will be CA$0.025 per share. Last year, in total, the company distributed CA$0.10 to shareholders. Last year's total dividend payments show that GMP Capital has a trailing yield of 3.7% on the current share price of CA$2.69. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for GMP Capital
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. GMP Capital reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.
Click here to see how much of its profit GMP Capital paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. GMP Capital reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. GMP Capital's dividend payments per share have declined at 26% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
Remember, you can always get a snapshot of GMP Capital's financial health, by checking our visualisation of its financial health, here.
To Sum It Up
From a dividend perspective, should investors buy or avoid GMP Capital? It's definitely not great to see that it paid a dividend despite reporting a loss last year. Worse, the general trend in its earnings looks negative in recent times. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Want to learn more about GMP Capital? Here's a visualisation of its historical rate of revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
