Gamehost Inc. (TSE:GH) Passed Our Checks, And It's About To Pay A CA$0.04 Dividend
Gamehost Inc. (TSE:GH) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Gamehost investors that purchase the stock on or after the 29th of November will not receive the dividend, which will be paid on the 15th of December.
The company's next dividend payment will be CA$0.04 per share. Last year, in total, the company distributed CA$0.36 to shareholders. Based on the last year's worth of payments, Gamehost stock has a trailing yield of around 3.9% on the current share price of CA$9.15. If you buy this business for its dividend, you should have an idea of whether Gamehost's dividend is reliable and sustainable. As a result, readers should always check whether Gamehost has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Gamehost
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Gamehost's payout ratio is modest, at just 40% of profit. A useful secondary check can be to evaluate whether Gamehost generated enough free cash flow to afford its dividend. It distributed 35% of its free cash flow as dividends, a comfortable payout level 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 how much of its profit Gamehost paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Gamehost, with earnings per share up 6.4% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Gamehost's dividend payments per share have declined at 8.5% per year on average over the past 10 years, which is uninspiring. Gamehost is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
Is Gamehost worth buying for its dividend? Earnings per share have been growing moderately, and Gamehost is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Gamehost is halfway there. Overall we think this is an attractive combination and worthy of further research.
While it's tempting to invest in Gamehost for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for Gamehost (1 is concerning!) that you ought to be aware of before buying the shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.
