Only Four Days Left To Cash In On Gibson Energy's (TSE:GEI) Dividend

Readers hoping to buy Gibson Energy Inc. (TSE:GEI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Gibson Energy investors that purchase the stock on or after the 28th of September will not receive the dividend, which will be paid on the 16th of October.

The company's next dividend payment will be CA$0.39 per share, and in the last 12 months, the company paid a total of CA$1.56 per share. Based on the last year's worth of payments, Gibson Energy stock has a trailing yield of around 7.7% on the current share price of CA$20.21. If you buy this business for its dividend, you should have an idea of whether Gibson Energy's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Gibson Energy

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Its dividend payout ratio is 79% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. A useful secondary check can be to evaluate whether Gibson Energy generated enough free cash flow to afford its dividend. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Gibson Energy's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Gibson Energy's earnings have been skyrocketing, up 24% per annum for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Gibson Energy has delivered 4.1% dividend growth per year on average over the past 10 years. Earnings per share have been growing much quicker than dividends, potentially because Gibson Energy is keeping back more of its profits to grow the business.

The Bottom Line

From a dividend perspective, should investors buy or avoid Gibson Energy? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Gibson Energy's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 79% and 54% respectively. Overall, it's hard to get excited about Gibson Energy from a dividend perspective.

In light of that, while Gibson Energy has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with Gibson Energy and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.