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The board of Gamehost Inc. (TSE:GH) has announced that it will pay a dividend of CA$0.05 per share on the 14th of February. This will take the dividend yield to an attractive 5.8%, providing a nice boost to shareholder returns.
See our latest analysis for Gamehost
Gamehost's Payment Could Potentially Have Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Gamehost's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS could expand by 8.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from CA$0.88 total annually to CA$0.60. The dividend has shrunk at around 3.8% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Has Growth Potential
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Gamehost has impressed us by growing EPS at 8.3% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
Gamehost Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Gamehost is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Gamehost that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.