MENU

Read this before buying G8 Education Ltd for its dividend

The G8 Education Ltd (ASX: GEM) share price has bounced back significantly since its lows of late 2018, but if you’ve been thinking of buying shares in early education acquirer for its divided there are a few things you need to know today.

The first is that shares will go ex-dividend tomorrow on Thursday March 14, 2019. This is the date when shares start selling without the value of its next dividend payment.

An investor needs to own the shares before the ex-date to receive the dividend which will be paid on Friday April 5, 2019.

What is G8 Education’s dividend yield?

At its recent full-year results G8 Education declared a final dividend of 8 cents per share (cps) for the second half of the year. This was down 20% on the 10 cps dividend declared in the same period in 2018 and at the current share price offers a trailing dividend yield of 3.8%, fully franked.

Is the dividend sustainable going forward?

This is a great question to ask before buying any company for its dividend.

G8 Education operates a ‘proportionate’ dividend policy which means the company aims to distribute 70% ‐ 80% of Net Profit After Tax (NPAT) in each half year period.

The policy was only introduced recently and makes sense for companies with stable earnings profiles. So it wouldn’t be much good for commodity producers like Rio Tinto Limited (ASX: RIO), or BHP Group Ltd (ASX: BHP) where earnings can move around with the pricing cycle.

Unfortunately, in the case of G8 Education, the policy has seen the dividend fall from 24 cps in 2016 to 12.5 cps currently as profit has declined. This is obviously not a good thing if you are looking for growing, or in the least, sustainable, dividend payments.

This could be set to correct in the short term, as the two biggest recent challenges to G8’s earnings – rising employment costs and increasing competition from new child care centers – appears to be easing.

Foolish Takeaway

I would expect G8 Education to start producing a lot more efficiency from the scale it has generated over the last eight years now that it is maturing. This may lead to higher dividends going forward, but without a clear competitive advantage, it wouldn’t be my preferred dividend play today.

If you rely on dividends to support your income today you can read about my favorite dividend pick to buy now here.

NEW! Top 3 Dividend Bets for 2019

With interest rates likely to stay at rock bottom for months (or YEARS) to come, income-minded investors have nowhere to turn... except dividend shares. That’s why The Motley Fool’s top analysts have just prepared a brand-new report, laying out their top 3 dividend bets for 2019.

Hint: These are 3 shares you’ve probably never come across before.

They’re not the banks. Not Woolies or Wesfarmers or any of the “usual suspects.”

We think these 3 shares offer solid growth prospects over the next 12 months. The first two currently offer fat, fully franked yields. The last is a surprising REIT offering you the benefits of being a landlord with none of the hassle! You’ll discover all three names and codes in "The Motley Fool’s Top 3 Dividend Shares for 2019."

Even better, your copy is free when you click the link below. Fair warning: This report is brand new and may not be available forever. Click the link below to be among the first investors to get access to this timely, important new research!

The names of these top 3 dividend bets are all included. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies move – we may be forced to remove this report.

Click here to claim your free copy right now!

Motley Fool contributor Regan Pearson has no position in any of the stocks mentioned.

You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now