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Genesis Energy's (NZSE:GNE) Shareholders Will Receive A Bigger Dividend Than Last Year

·3 min read

Genesis Energy Limited's (NZSE:GNE) dividend will be increasing from last year's payment of the same period to NZ$0.1016 on 7th of October. This will take the annual payment to 6.0% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Genesis Energy

Genesis Energy Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Genesis Energy's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 106% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

EPS is set to fall by 47.0% over the next 12 months. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 181%, which is definitely a bit high to be sustainable going forward.

historic-dividend
historic-dividend

Genesis Energy Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 8 years was NZ$0.132 in 2014, and the most recent fiscal year payment was NZ$0.176. This means that it has been growing its distributions at 3.7% per annum over that time. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Genesis Energy Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Genesis Energy has been growing its earnings per share at 12% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Genesis Energy's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Strong earnings growth means Genesis Energy has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Genesis Energy (2 don't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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