Is the dividend payout ratio sustainable given the company's current cash flow and earnings? | GTN (Aug 08, 2025) | Candlesense

Is the dividend payout ratio sustainable given the company's current cash flow and earnings?

Short answer:

Based solely on the press release you provided, there is not enough quantitative information to determine definitively whether a $0.08‑per‑share quarterly dividend (or a $0.32 annualized dividend) is sustainable for Gray Media, Inc. (NYSE: GTN).

To assess sustainability you need to compare the dividend amount to the company’s earnings, operating cash flow, and free cash flow (FCF), and also consider the firm’s capital‑expenditure needs, debt‑service obligations, and any share‑repurchase or acquisition plans. Below is a step‑by‑step framework you can use, together with the specific data points you should pull from Gray’s most recent financial statements (10‑Q, 10‑K, earnings release, or management commentary).


1. Calculate the Dividend Payout Ratio

Metric Formula What you need
Annual dividend per share $0.08 × 4 = $0.32 Dividend announcement (already given)
Earnings per share (EPS) Net income ÷ diluted shares outstanding Net income (from the most recent quarter or FY) and diluted share count
Payout ratio (based on earnings) (Annual dividend per share ÷ EPS) × 100% EPS
Dividend to cash flow ratio (Annual dividend per share ÷ Operating cash flow per share) × 100% Operating cash flow (OCF) and diluted shares
Dividend to free cash flow ratio (Annual dividend per share ÷ Free cash flow per share) × 100% Free cash flow (OCF – capex) and diluted shares

Interpretation guide

Payout Ratio Typical Interpretation
< 30 % Very conservative; ample cushion for growth or debt reduction
30 %–60 % Typical for mature, cash‑generating firms; generally sustainable if earnings and cash flow are stable
> 60 % Aggressive; sustainability depends on strong, predictable cash flow or a strategic decision to return most earnings to shareholders
> 100 % Unsustainable unless supported by large cash reserves or asset sales

2. Gather the Necessary Numbers

Source What to Look For
Form 10‑Q (latest quarter) • Net income (or loss)
• Operating cash flow (statement of cash flows)
• Capital expenditures (CAPEX)
• Diluted shares outstanding (balance‑sheet footnote)
Form 10‑K (most recent FY) Same items, but annual totals – useful for trend analysis
Management discussion (Earnings call/press release) • Guidance on future earnings and cash flow
• Commentary on dividend policy or any planned buybacks
Analyst estimates (e.g., Bloomberg, FactSet, S&P Capital IQ) • Consensus EPS forecasts for the next 12‑months (Forward P/E)
• Projected cash‑flow trends

If you have access to Bloomberg or FactSet, you can retrieve “Div % of Earnings” and “Div % of Cash Flow” already calculated.


3. Example – How to Perform the Calculation (Illustrative Numbers)

Note: The numbers below are hypothetical. Replace them with Gray’s actual data.

Item Value
Net income (Q2‑2025) $45 million
Diluted shares outstanding 200 million
EPS (Q2) $0.225
Annualized EPS (extrapolated) $0.90
Operating cash flow (Q2) $60 million
CAPEX (Q2) $12 million
Free cash flow (Q2) $48 million
OCF per share (quarter) $0.30
FCF per share (quarter) $0.24
Annualized OCF per share $1.20
Annualized FCF per share $0.96

Calculations

Ratio Formula Result (illustrative)
Earnings payout $0.32 ÷ $0.90 × 100% 35 %
Operating‑cash‑flow payout $0.32 ÷ $1.20 × 100% 27 %
Free‑cash‑flow payout $0.32 ÷ $0.96 × 100% 33 %

Interpretation: With payout ratios in the 27‑35 % range, the dividend would be considered conservative to moderate and, assuming earnings and cash flow remain stable, likely sustainable.

If Gray’s actual EPS were, say, $0.15 per share (annualized $0.60), the earnings payout would jump to 53 %, still within a sustainable range for a mature media company, provided cash flow remains strong. Conversely, if EPS were only $0.10 per share (annualized $0.40), the payout would be 80 %, raising red flags unless the firm has sizable cash reserves or a very low CAPEX requirement.


4. Other Sustainability Drivers to Review

Factor Why It Matters What to Look For
Cash‑reserve balance Large cash piles can support higher payouts temporarily Cash and cash equivalents on the balance sheet
Debt profile High interest expense may limit cash available for dividends Total debt, debt‑to‑EBITDA, interest coverage ratio
Capital‑expenditure trends Media companies often need to invest in technology, content, or infrastructure Historical CAPEX as % of revenue; management’s forward‑looking CAPEX guidance
Dividend policy statement Management may explicitly target a payout ratio or “stable dividend” approach MD&A or Investor‑Relations releases
Seasonality & cyclicality Advertising revenue (common for media) can be volatile Quarterly revenue trends and guidance
Share‑repurchase activity If the company is buying back shares heavily, it may limit cash for dividends Recent buyback announcements and cash used

5. Quick “Yes/No” Checklist

Question Yes → Good sign No → Caution
Is the earnings payout ≤ 60 %? Likely sustainable if cash flow is strong May be aggressive; check cash flow
Is the free‑cash‑flow payout ≤ 40 %? Comfortable buffer for capex & debt Could strain liquidity
Does the firm have > 6‑12 months of operating cash in reserves? Provides cushion for a dip in earnings Small cash pile → higher risk
Is debt‑service (interest) < 20 % of operating cash flow? Debt burden manageable High interest load could crowd out dividend
Has management signaled a “stable or growing dividend” policy? Aligns with sustainable payout May be a one‑off or opportunistic dividend

If most answers are “Yes,” you can answer yes, the dividend appears sustainable; if several are “No,” a more cautious assessment (“the dividend may be at risk if earnings or cash flow deteriorate”) is warranted.


6. How to Communicate the Verdict (Template)

Based on the data currently available, Gray Media’s quarterly dividend of $0.08 per share translates to a $0.32 annualized dividend.

Using the most recent earnings and cash‑flow figures (insert actual numbers), the dividend represents X % of earnings, Y % of operating cash flow, and **Z % of free cash flow.

With a payout ratio of X %, which is generally considered [conservative/moderate/aggressive] for a company in the media sector, the dividend appears [sustainable/potentially unsustainable], provided that:

  1. Earnings remain at or above the current level (or the company continues to generate positive free cash flow).
  2. Capital‑expenditure requirements do not increase sharply, and the firm maintains adequate cash reserves.
  3. Debt‑service obligations stay comfortably covered by operating cash flow.

If any of these assumptions change—e.g., a decline in ad revenue, higher CAPEX, or tighter credit conditions—the ability to sustain the $0.08 quarterly payout could be challenged.

Recommendation: Review Gray’s latest Form 10‑Q/10‑K for the exact figures, monitor quarterly earnings releases, and keep an eye on management’s commentary regarding dividend policy and cash‑flow outlook.


Bottom line

  • You need concrete numbers (EPS, operating cash flow, free cash flow, debt, cash balances) from Gray’s recent filings to calculate the payout ratios.
  • If those ratios fall within the typical “sustainable” bands (≈30‑60 % of earnings and ≤ 40 % of free cash flow), the dividend is likely sustainable.
  • If the ratios are higher, examine cash reserves, debt load, and upcoming capital‑expenditure plans to gauge risk.

Feel free to share the latest 10‑Q or earnings release, and I can run the exact calculations for you.