Good dividends are hard to come by, and high dividends usually are not sustainable. However, GameStop Corp. (NYSE:GME) currently pays out a dividend of just under 7% per year that doesn’t break the bank. The company currently pays $0.38 per share every quarter, for a total payout of $1.52 a year. By comparison, the company’s earnings per share for the trailing twelve months has totaled $3.35, making for a payout ratio of just 45%.
If a sustainable dividend of almost 7% wasn’t enough to interest you, perhaps the fact that GameStop grows its dividends will be enough to convince you it is a good buy. In 2012 the company’s dividends paid out just $0.80 per year, and have increased by 90% since. However, the past couple years the dividend has only increased by a little more than 2%. With a low payout ratio GameStop has plenty of room to continue to grow its dividend.
The one caveat is that GameStop does not have a long history of paying dividends, and only started in 2012. However, that should not deter you as the company has been profitable year after year and with a low payout ratio there is no urgency for the company to cut or stop its dividend.
A big reason for the high dividend yield is GameStop has seen its share price drop by 30% in the past year, while the dividend payment has remained intact. This is an excellent opportunity to get in on a dividend stock that has taken a beating. You could also wait out a further decline to see if the yield could push higher, but in the past month the stock has appreciated by almost 4%, so the worst may be over.
