GQG Partners Inc. (ASX:GQG) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of March to $0.0603. This will take the annual payment to 8.8% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for GQG Partners

GQG Partners' Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, GQG Partners was paying out a very large proportion of what it was earning and 100% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 27.3%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 115%, which probably can't continue without putting some pressure on the balance sheet.

GQG Partners Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The annual payment during the last 3 years was $0.0616 in 2022, and the most recent fiscal year payment was $0.137. This means that it has been growing its distributions at 30% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that GQG Partners has grown earnings per share at 108% per year over the past three years. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why GQG Partners is not retaining those earnings to reinvest in growth.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for GQG Partners that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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