Read This Before Considering Great-West Lifeco Inc. (TSE:GWO) For Its Upcoming CA$0.44 Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Great-West Lifeco Inc. (TSE:GWO) is about to trade ex-dividend in the next four days. Investors can purchase shares before the 2nd of March in order to be eligible for this dividend, which will be paid on the 31st of March.
Great-West Lifeco's upcoming dividend is CA$0.44 a share, following on from the last 12 months, when the company distributed a total of CA$1.75 per share to shareholders. Looking at the last 12 months of distributions, Great-West Lifeco has a trailing yield of approximately 5.5% on its current stock price of CA$31.99. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Great-West Lifeco
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Great-West Lifeco paid out more than half (55%) of its earnings last year, which is a regular payout ratio for most companies.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Great-West Lifeco, with earnings per share up 2.7% on average over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Great-West Lifeco has delivered an average of 3.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is Great-West Lifeco an attractive dividend stock, or better left on the shelf? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. It doesn't appear an outstanding opportunity, but could be worth a closer look.
If you're not too concerned about Great-West Lifeco's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 1 warning sign for Great-West Lifeco that we recommend you consider before investing in the business.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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.
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