Yahoo Finance GSK plc (LON:GSK) Will Pay A UK£0.14 Dividend In Four Days
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see GSK plc (LON:GSK) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase GSK's shares on or after the 16th of November will not receive the dividend, which will be paid on the 11th of January.
The company's next dividend payment will be UK£0.14 per share. Last year, in total, the company distributed UK£0.61 to shareholders. Looking at the last 12 months of distributions, GSK has a trailing yield of approximately 4.4% on its current stock price of £13.984. If you buy this business for its dividend, you should have an idea of whether GSK's dividend is reliable and sustainable. As a result, readers should always check whether GSK has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for GSK
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see GSK paying out a modest 37% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out more than half (72%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that GSK's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see GSK's earnings have been skyrocketing, up 31% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. GSK has seen its dividend decline 4.0% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
Final Takeaway
Should investors buy GSK for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, GSK paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about GSK, and we would prioritise taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 2 warning signs for GSK that you should be aware of before investing in their shares.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.
