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Is It Worth Considering GeoPark Limited (NYSE:GPRK) For Its Upcoming Dividend?

Simply Wall St
·3 min read

Readers hoping to buy GeoPark Limited (NYSE:GPRK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 19th of November will not receive the dividend, which will be paid on the 9th of December.

GeoPark's next dividend payment will be US$0.021 per share, and in the last 12 months, the company paid a total of US$0.082 per share. Based on the last year's worth of payments, GeoPark stock has a trailing yield of around 0.9% on the current share price of $8.95. If you buy this business for its dividend, you should have an idea of whether GeoPark's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for GeoPark

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. GeoPark reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If GeoPark didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. The good news is it paid out just 5.8% of its free cash flow in the last year.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. GeoPark reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Given that GeoPark has only been paying a dividend for a year, there's not much of a past history to draw insight from.

We update our analysis on GeoPark every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Is GeoPark an attractive dividend stock, or better left on the shelf? It's hard to get used to GeoPark paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of GeoPark's dividend merits.

While it's tempting to invest in GeoPark for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with GeoPark and understanding them should be part of your investment process.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

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