Gibson Energy (TSE:GEI) Has Affirmed Its Dividend Of CA$0.35

By
Simply Wall St
Published
August 21, 2021
TSX:GEI
Source: Shutterstock

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 6.3% based on this payment which is still above the industry average.

Check out our latest analysis for Gibson Energy

Gibson Energy Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 212% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 58.3%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 137%, which probably can't continue putting some pressure on the balance sheet.

historic-dividend
TSX:GEI Historic Dividend August 21st 2021

Gibson Energy Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. 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 implies that the company grew its distributions at a yearly rate of about 3.8% over that duration. 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.

Gibson Energy Might Find It Hard To Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Gibson Energy has grown earnings per share at 69% per year over the past five years. While EPS is growing rapidly, Gibson Energy paid out a very high 212% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Gibson Energy has 5 warning signs (and 2 which are potentially serious) 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.

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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.
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