Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Over the past 10 years, Genesis Energy LP (NYSE:GEL) has returned an average of 7.00% per year to shareholders in terms of dividend yield. Does Genesis Energy tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Genesis Energy
Here’s how I find good dividend stocks
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Genesis Energy fare?
GEL currently pays out twice what it is earning, according to its trailing twelve-month data, meaning that the dividend is predominantly funded by retained earnings. Going forward, analysts expect GEL’s payout to fall to 143.06% of its earnings, which leads to a dividend yield of 10.29%. Moreover, EPS should increase to $0.76, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although GEL’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Shareholders would have seen a few years of reduced payments in this time.Relative to peers, Genesis Energy has a yield of 10.77%, which is high for Oil and Gas stocks.
Whilst there are few things you may like about Genesis Energy from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. There are three fundamental aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for GEL’s future growth? Take a look at our free research report of analyst consensus for GEL’s outlook.
- Historical Performance: What has GEL’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.