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Is Buying Green Plains Inc (NASDAQ:GPRE) For Its Upcoming US$0.12 Dividend A Good Choice?

Dane Simmons

On the 14 September 2018, Green Plains Inc (NASDAQ:GPRE) will be paying shareholders an upcoming dividend amount of US$0.12 per share. However, investors must have bought the company’s stock before 24 August 2018 in order to qualify for the payment. That means you have only 2 days left! What does this mean for current shareholders and potential investors? Below, I will explain how holding Green Plains can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.

See our latest analysis for Green Plains

5 checks you should use to assess a dividend stock

Whenever I am looking at a potential dividend stock investment, I always check these five metrics:

  • Is it paying an annual yield above 75% of dividend payers?
  • Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
  • Has it increased its dividend per share amount over the past?
  • Can it afford to pay the current rate of dividends from its earnings?
  • Will the company be able to keep paying dividend based on the future earnings growth?
NasdaqGS:GPRE Historical Dividend Yield August 21st 18

How well does Green Plains fit our criteria?

Green Plains has a trailing twelve-month payout ratio of 34.05%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 49.85%, leading to a dividend yield of around 2.94%. However, EPS is forecasted to fall to $-0.18 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Green Plains as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, Green Plains produces a yield of 2.67%, which is on the low-side for Oil and Gas stocks.

Next Steps:

Whilst there are few things you may like about Green Plains from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three essential aspects you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for GPRE’s future growth? Take a look at our free research report of analyst consensus for GPRE’s outlook.
  2. Valuation: What is GPRE worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether GPRE is currently mispriced by the market.
  3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.