Don’t Trust LON:GVC’s 2.96% Yield

A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. In the past 10 years GVC Holdings PLC (LSE:GVC) has returned an average of 10.00% per year to investors in the form of dividend payouts. Should it have a place in your portfolio? Let’s take a look at GVC Holdings in more detail. View our latest analysis for GVC Holdings

5 checks you should do on 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 it paid dividend every year without dramatically reducing payout in the past?

• Has it increased its dividend per share amount over the past?

• Is is able to pay the current rate of dividends from its earnings?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

LSE:GVC Historical Dividend Yield Jun 14th 18

How well does GVC Holdings fit our criteria?

GVC Holdings has a negative payout ratio, which means that it is loss-making, and paying its dividend from its retained earnings. 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. Dividend payments from GVC Holdings have been volatile in the past 10 years, with some years experiencing significant drops of over 25%. These characteristics do not bode well for income investors seeking reliable stream of dividends. Compared to its peers, GVC Holdings generates a yield of 2.96%, which is high for Hospitality stocks but still below the market’s top dividend payers.

Next Steps:

After digging a little deeper into GVC Holdings’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering 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. Below, I’ve compiled three essential factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for GVC’s future growth? Take a look at our free research report of analyst consensus for GVC’s outlook.

2. Valuation: What is GVC 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 GVC is currently mispriced by the market.

3. 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 pass 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.