Genesis Energy (NZSE:GNE) Has Announced A Dividend Of NZ$0.0824

The board of Genesis Energy Limited (NZSE:GNE) has announced that it will pay a dividend of NZ$0.0824 per share on the 11th of October. The yield is still above the industry average at 6.2%.

View our latest analysis for Genesis Energy

Genesis Energy's Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Genesis Energy's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Looking forward, earnings per share is forecast to fall by 15.8% over the next year. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 167%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was NZ$0.132 in 2014, and the most recent fiscal year payment was NZ$0.14. Its dividends have grown at less than 1% per annum over this time frame. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Genesis Energy has grown earnings per share at 16% per year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Genesis Energy you should be aware of, and 1 of them makes us a bit uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high yield 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.