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Four Days Left To Buy Games Workshop Group PLC (LON:GAW) Before The Ex-Dividend Date

Simply Wall St

It looks like Games Workshop Group PLC (LON:GAW) is about to go ex-dividend in the next four days. If you purchase the stock on or after the 17th of September, you won't be eligible to receive this dividend, when it is paid on the 23rd of October.

Games Workshop Group's next dividend payment will be UK£0.50 per share. Last year, in total, the company distributed UK£1.45 to shareholders. Calculating the last year's worth of payments shows that Games Workshop Group has a trailing yield of 1.4% on the current share price of £101.5. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Games Workshop Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Games Workshop Group paid out 66% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Games Workshop Group generated enough free cash flow to afford its dividend. It paid out more than half (59%) of its free cash flow in the past year, which is within an average range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Games Workshop Group's earnings have been skyrocketing, up 42% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Games Workshop Group has lifted its dividend by approximately 19% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

From a dividend perspective, should investors buy or avoid Games Workshop Group? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Games Workshop Group's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 66% and 59% respectively. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So while Games Workshop Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for Games Workshop Group that we recommend you consider before investing in the business.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.