VH Global Sustainable Energy Opportunities' (LON:GSEO) Dividend Will Be £0.0138

The board of VH Global Sustainable Energy Opportunities plc (LON:GSEO) has announced that it will pay a dividend of £0.0138 per share on the 14th of September. This makes the dividend yield 6.7%, which will augment investor returns quite nicely.

See our latest analysis for VH Global Sustainable Energy Opportunities

VH Global Sustainable Energy Opportunities' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, VH Global Sustainable Energy Opportunities' dividend was only 67% of earnings, however it was paying out 115% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

EPS is set to fall by 5.8% over the next 12 months if recent trends continue. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 86%, meaning that most of the company's earnings is being paid out to shareholders.

VH Global Sustainable Energy Opportunities Doesn't Have A Long Payment History

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 2 years was £0.025 in 2021, and the most recent fiscal year payment was £0.0552. This means that it has been growing its distributions at 49% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. VH Global Sustainable Energy Opportunities has seen earnings per share falling at 5.8% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

VH Global Sustainable Energy Opportunities' 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. While VH Global Sustainable Energy Opportunities is earning enough to cover the payments, the cash flows are lacking. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for VH Global Sustainable Energy Opportunities that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.