Gibson Energy's (TSE:GEI) Dividend Will Be CA$0.35
The board of Gibson Energy Inc. (TSE:GEI) has announced that it will pay a dividend of CA$0.35 per share on the 15th of October. The dividend yield will be 6.0% based on this payment which is still above the industry average.
See our latest analysis for Gibson Energy
Gibson Energy Doesn't Earn Enough To Cover Its Payments
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, the company was paying out 212% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Earnings per share is forecast to rise by 57.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 138%, which probably can't continue putting some pressure on the balance sheet.
Gibson Energy Has A Solid Track Record
The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was CA$0.96 in 2011, and the most recent fiscal year payment was CA$1.40. This means that it has been growing its distributions at 3.8% per annum over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
Dividend Growth Could Be Constrained
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Gibson Energy has grown earnings per share at 69% per year over the past five years. EPS has been growing well, but Gibson Energy has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Gibson Energy's payments, as there could be some issues with sustaining them into the future. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Gibson Energy has 5 warning signs (and 2 which make us uncomfortable) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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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