Should Gama Aviation Plc (LON:GMAA) Be Part Of Your Portfolio?
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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Gama Aviation Plc (LON:GMAA) has recently paid dividends to shareholders, and currently yields 3.0%. Does Gama Aviation tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for Gama Aviation
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
Is their annual yield among the top 25% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has the amount of dividend per share grown over the past?
Does earnings amply cover its dividend payments?
Will it have the ability to keep paying its dividends going forward?
Does Gama Aviation pass our checks?
Gama Aviation has a trailing twelve-month payout ratio of 23%, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 17% which, assuming the share price stays the same, leads to a dividend yield of around 3.3%.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view Gama Aviation as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Gama Aviation generates a yield of 3.0%, which is on the low-side for Airlines stocks.
Next Steps:
Whilst there are few things you may like about Gama Aviation from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three important aspects you should further research:
Future Outlook: What are well-informed industry analysts predicting for GMAA’s future growth? Take a look at our free research report of analyst consensus for GMAA’s outlook.
Valuation: What is GMAA worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GMAA is currently mispriced by the market.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
