Gibson Energy (TSE:GEI) Is Due To Pay A Dividend Of CA$0.35

By
Simply Wall St
Published
November 04, 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 17th of January. This means the annual payment is 6.0% of the current stock price, which is above the average for the industry.

See our latest analysis for Gibson Energy

Gibson Energy Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. 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 32.1%. If the dividend continues on its recent course, the payout ratio in 12 months could be 139%, which is a bit high and could start applying pressure to the balance sheet.

historic-dividend
TSX:GEI Historic Dividend November 5th 2021

Gibson Energy Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2011, the dividend has gone from CA$0.96 to CA$1.40. This means that it has been growing its distributions at 3.8% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

Gibson Energy's Dividend Might Lack Growth

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Gibson Energy has impressed us by growing EPS at 64% per year over the past five years. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

The Dividend Could Prove To Be Unreliable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 4 warning signs for Gibson Energy (2 are concerning!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.