Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Gateley (Holdings) Plc (LON:GTLY) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be one business day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Gateley (Holdings)'s shares on or after the 23rd of February will not receive the dividend, which will be paid on the 31st of March.

The company's next dividend payment will be UK£0.033 per share, and in the last 12 months, the company paid a total of UK£0.085 per share. Based on the last year's worth of payments, Gateley (Holdings) has a trailing yield of 4.9% on the current stock price of £1.79. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Gateley (Holdings)

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. Gateley (Holdings) paid out more than half (73%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Gateley (Holdings) generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (80%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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.



Click here to see the company's payout ratio, plus analyst estimates of its future dividends. historic-dividend

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. This is why it's a relief to see Gateley (Holdings) earnings per share are up 4.5% per annum over the last five years. A high payout ratio of 73% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Gateley (Holdings) could be signalling that its future growth prospects are thin.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Gateley (Holdings) has delivered an average of 13% per year annual increase in its dividend, based on the past seven years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Gateley (Holdings) worth buying for its dividend? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. In summary, it's hard to get excited about Gateley (Holdings) from a dividend perspective.

However if you're still interested in Gateley (Holdings) as a potential investment, you should definitely consider some of the risks involved with Gateley (Holdings). Our analysis shows 2 warning signs for Gateley (Holdings) and you should be aware of them before buying any 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.

Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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