Global Ship Lease, Inc. (NYSE:GSL) is about to trade ex-dividend in the next 4 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. The ex-dividend date is important as the process of settlement involves a full business day. So if you miss that date, you would not show up on the company’s books on the record date. Meaning, you will need to purchase Global Ship Lease’s shares before the 21st of November to receive the dividend, which will be paid on the 4th of December.
The company’s next dividend payment will be US$0.625 per share, on the back of last year when the company paid a total of US$2.50 to shareholders. Based on the last year’s worth of payments, Global Ship Lease stock has a trailing yield of around 7.2% on the current share price of US$34.51. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! So we need to investigate whether Global Ship Lease can afford its dividend, and if the dividend could grow.
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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Global Ship Lease has a low and conservative payout ratio of just 19% of its income after tax. 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. Over the last year it paid out 56% of its free cash flow as dividends, within the usual range for most companies.
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.
Check out our latest analysis for Global Ship Lease
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That’s why it’s comforting to see Global Ship Lease’s earnings have been skyrocketing, up 50% per annum for the past five years.