Four Days Left To Buy Genesis Energy Limited (NZSE:GNE) Before The Ex-Dividend Date
Genesis Energy Limited (NZSE:GNE) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Genesis Energy investors that purchase the stock on or after the 22nd of March will not receive the dividend, which will be paid on the 6th of April.
The company's next dividend payment will be NZ$0.10 per share, and in the last 12 months, the company paid a total of NZ$0.18 per share. Calculating the last year's worth of payments shows that Genesis Energy has a trailing yield of 6.3% on the current share price of NZ$2.775. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Genesis Energy can afford its dividend, and if the dividend could grow.
See our latest analysis for Genesis Energy
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Genesis Energy paid out 66% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 52% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Genesis Energy's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Genesis Energy's earnings per share have been growing at 18% a year for the past five years. Genesis Energy has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, eight years ago, Genesis Energy has lifted its dividend by approximately 3.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Genesis Energy is keeping back more of its profits to grow the business.
Should investors buy Genesis Energy for the upcoming dividend? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Genesis Energy's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 66% and 52% respectively. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Genesis Energy's dividend merits.
While it's tempting to invest in Genesis Energy for the dividends alone, you should always be mindful of the risks involved. Be aware that Genesis Energy is showing 3 warning signs in our investment analysis, and 1 of those is concerning...
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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