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

By
Simply Wall St
Published
August 07, 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. This means the annual payment is 6.2% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Gibson Energy

Gibson Energy Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

The next 12 months is set to see EPS grow by 57.6%. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 138% over the next year.

historic-dividend
TSX:GEI Historic Dividend August 7th 2021

Gibson Energy Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from CA$0.96 in 2011 to the most recent annual payment of 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Gibson Energy has impressed us by growing EPS at 69% per year over the past five years. Although earnings per share is up nicely Gibson Energy is paying out 212% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Gibson Energy's Dividend Doesn't Look Sustainable

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 probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 are potentially serious) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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