Is GBST Holdings Limited (ASX:GBT) A Great Dividend Stock?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, GBST Holdings Limited (ASX:GBT) has paid a dividend to shareholders. It currently yields 3.0%. Does GBST Holdings tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis.
See our latest analysis for GBST Holdings
5 checks you should use to assess a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Does it pay an annual yield higher than 75% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has it increased its dividend per share amount over the past?
Does earnings amply cover its dividend payments?
Will it be able to continue to payout at the current rate in the future?
Does GBST Holdings pass our checks?
The current trailing twelve-month payout ratio for the stock is 54%, which means that the dividend is covered by earnings. Going forward, analysts expect GBT’s payout to remain around the same level at 49% of its earnings, which leads to a dividend yield of around 4.9%. Moreover, EPS should increase to A$0.099.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
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. Not only have dividend payouts from GBST Holdings fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
In terms of its peers, GBST Holdings has a yield of 3.0%, which is high for IT stocks but still below the market’s top dividend payers.
Next Steps:
If GBST Holdings is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three key aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for GBT’s future growth? Take a look at our free research report of analyst consensus for GBT’s outlook.
Valuation: What is GBT 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 GBT 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.
