Genesis Energy's (NZSE:GNE) Dividend Will Be Reduced To NZ$0.0824
Genesis Energy Limited (NZSE:GNE) is reducing its dividend from last year's comparable payment to NZ$0.0824 on the 10th of April. The dividend yield of 7.0% is still a nice boost to shareholder returns, despite the cut.
Check out our latest analysis for Genesis Energy
Genesis Energy Is Paying Out More Than It Is Earning
If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Genesis Energy's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
Earnings per share is forecast to rise by 63.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 144%, which probably can't continue without putting some pressure on the balance sheet.
Genesis Energy Is Still Building Its Track Record
The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of NZ$0.132 in 2015 to the most recent total annual payment of NZ$0.176. This works out to be a compound annual growth rate (CAGR) of approximately 3.2% a year over that time. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.
Dividend Growth Could Be Constrained
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Genesis Energy has grown earnings per share at 15% per year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.
Our Thoughts On Genesis Energy's Dividend
Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Genesis Energy is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Genesis Energy has 4 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Is Genesis Energy not quite the opportunity you were looking for? Why not check out 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.
