Shares of childcare centre owner and operator, G8 Education Ltd (ASX: GEM), have soared 3% today following a market sensitive announcement this morning.
G8 Education, who pays its dividends on a quarterly basis, has seen its share price mercilessly sold off during the past six months, falling 30.5%, whilst the broader S&P/ASX200 (ASX: XJO) (Index: ^AXJO) rose 11%.
However, the announcement of a six cents per share fully franked dividend this morning appears to have revived the company's share price, at least for now.
As I recently noted, if G8 Education continues to pay the current six cents per share dividend over the next four quarters, its dividend yield will grow considerably. In fact, based on this morning's open price of $3.69, it equates to a dividend yield of 6.5% fully franked!
Grossed-up for franking credits, that's a whopping 9.3% – try getting that from the bank in this low-interest rate environment.
Source: G8 Education – Declaration of Quarterly Dividend.
However investors whose predilection is capital gains over income can elect to participate in G8 Education's dividend reinvestment plan (DRP) for a further 5% discount to the daily weighted average market price. This will be calculated over the five days up to and including its ex-dividend date plus the four days immediately following it.
The last day to participate in the DRP falls on 3 April 2015.
Should you buy G8 Education shares?
I – along with many other Foolish writers – have been quite bullish on G8 Education shares in recent times. Whilst risks persist, so long as occupancy rates remain high, it pays a good price for acquisitions and interest cover remains adequate, its current price will prove a great buying opportunity.
