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

By
Simply Wall St
Published
November 28, 2021
TSX:GEI
Source: Shutterstock

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 makes the dividend yield 6.0%, which will augment investor returns quite nicely.

See our latest analysis for Gibson Energy

Gibson Energy Is Paying Out More Than It Is Earning

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. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

The next 12 months is set to see EPS grow by 35.3%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 135%, which probably can't continue putting some pressure on the balance sheet.

historic-dividend
TSX:GEI Historic Dividend November 29th 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. Since 2011, the first annual payment was CA$0.96, compared to the most recent full-year payment of CA$1.40. This means that it has been growing its distributions at 3.8% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

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. It's encouraging to see Gibson Energy has been growing its earnings per share at 64% a year over the past five years. EPS has been growing well, but Gibson Energy has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Gibson Energy's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for Gibson Energy you should be aware of, and 2 of them are significant. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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