Genesis Energy (NZSE:GNE) Is Increasing Its Dividend To NZ$0.1035

The board of Genesis Energy Limited (NZSE:GNE) has announced that it will be paying its dividend of NZ$0.1035 on the 6th of October, an increased payment from last year's comparable dividend. This takes the dividend yield to 7.2%, which shareholders will be pleased with.

See our latest analysis for Genesis Energy

Genesis Energy Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Genesis Energy's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Over the next year, EPS is forecast to fall by 51.8%. If the dividend continues along the path it has been on recently, the company could be paying out more than double what it is earning, which is definitely a bit high to be sustainable going forward.

Genesis Energy Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 9 years was NZ$0.132 in 2014, and the most recent fiscal year payment was NZ$0.176. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn't want to rely on this dividend too much.

Dividend Growth Could Be Constrained

Investors could be attracted to the stock based on the quality of its payment history. Genesis Energy has impressed us by growing EPS at 56% per year over the past five years. EPS has been growing well, but Genesis Energy has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Our Thoughts On Genesis Energy's Dividend

Overall, we always like to see the dividend being raised, but we don't think Genesis Energy will make a great income stock. 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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Genesis Energy has 3 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.