U.S. Markets close in 45 mins
  • S&P 500

    3,644.82
    -10.22 (-0.28%)
     
  • Dow 30

    29,120.31
    -140.50 (-0.48%)
     
  • Nasdaq

    10,818.54
    +15.62 (+0.14%)
     
  • Russell 2000

    1,663.85
    +7.97 (+0.48%)
     
  • Crude Oil

    78.56
    +1.85 (+2.41%)
     
  • Gold

    1,638.00
    +4.60 (+0.28%)
     
  • Silver

    18.41
    -0.07 (-0.38%)
     
  • EUR/USD

    0.9593
    -0.0018 (-0.1919%)
     
  • 10-Yr Bond

    3.9640
    +0.0860 (+2.22%)
     
  • Vix

    33.12
    +0.86 (+2.67%)
     
  • GBP/USD

    1.0717
    +0.0034 (+0.3194%)
     
  • USD/JPY

    144.8590
    +0.1790 (+0.1237%)
     
  • BTC-USD

    19,136.76
    -35.58 (-0.19%)
     
  • CMC Crypto 200

    438.94
    -20.20 (-4.40%)
     
  • FTSE 100

    6,984.59
    -36.36 (-0.52%)
     
  • Nikkei 225

    26,571.87
    +140.32 (+0.53%)
     

Global Payments (NYSE:GPN) Will Pay A Dividend Of $0.25

·3 min read

The board of Global Payments Inc. (NYSE:GPN) has announced that it will pay a dividend of $0.25 per share on the 30th of September. Including this payment, the dividend yield on the stock will be 0.8%, which is a modest boost for shareholders' returns.

See our latest analysis for Global Payments

Global Payments' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Global Payments' dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Analysts expect a massive rise in earnings per share in the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

historic-dividend
historic-dividend

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the annual payment back then was $0.04, compared to the most recent full-year payment of $1.00. This means that it has been growing its distributions at 38% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Global Payments' EPS has declined at around 27% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Global Payments' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Global Payments' payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 4 warning signs for Global Payments that you should be aware of before investing. Is Global Payments not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here