Why You Might Be Interested In Goodtech ASA (OB:GOD) For Its Upcoming Dividend
It looks like Goodtech ASA (OB:GOD) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Goodtech's shares on or after the 16th of October will not receive the dividend, which will be paid on the 28th of October.
The company's next dividend payment will be kr02.00 per share. Last year, in total, the company distributed kr0.50 to shareholders. Last year's total dividend payments show that Goodtech has a trailing yield of 2.9% on the current share price of kr017.20. If you buy this business for its dividend, you should have an idea of whether Goodtech's dividend is reliable and sustainable. As a result, readers should always check whether Goodtech has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Goodtech paying out a modest 36% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 41% of its free cash flow in the past year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
See our latest analysis for Goodtech
Click here to see how much of its profit Goodtech paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Goodtech has grown its earnings rapidly, up 68% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Goodtech has seen its dividend decline 10% per annum on average over the past 10 years, which is not great to see. Goodtech is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
The Bottom Line
Is Goodtech worth buying for its dividend? It's great that Goodtech is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Goodtech looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Goodtech for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Goodtech that we recommend you consider before investing in the business.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.