GrainCorp (ASX:GNC) Will Pay A Dividend Of A$0.24

Yahoo

17-05-2025

The board of GrainCorp Limited (ASX:GNC) has announced that it will pay a dividend of A$0.24 per share on the 17th of July. Based on this payment, the dividend yield on the company's stock will be 6.1%, which is an attractive boost to shareholder returns.
Our free stock report includes 3 warning signs investors should be aware of before investing in GrainCorp. Read for free now.
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, GrainCorp's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 109% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.
Over the next year, EPS is forecast to expand by 64.7%. If the dividend continues on its recent course, the payout ratio in 12 months could be 97%, which is a bit high and could start applying pressure to the balance sheet.
See our latest analysis for GrainCorp
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was A$0.20 in 2015, and the most recent fiscal year payment was A$0.48. This means that it has been growing its distributions at 9.1% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that GrainCorp has grown earnings per share at 6.5% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for GrainCorp you should be aware of, and 1 of them is significant. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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