- New Zealand
- Electric Utilities
Income Investors Should Know That Genesis Energy Limited (NZSE:GNE) Goes Ex-Dividend Soon
Genesis Energy Limited (NZSE:GNE) is about to trade ex-dividend in the next 4 days. 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Genesis Energy's shares on or after the 22nd of March, you won't be eligible to receive the dividend, when it is paid on the 6th of April.
The company's next dividend payment will be NZ$0.10 per share. Last year, in total, the company distributed NZ$0.18 to shareholders. Based on the last year's worth of payments, Genesis Energy stock has a trailing yield of around 6.3% on the current share price of NZ$2.775. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for Genesis Energy
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Genesis Energy is paying out an acceptable 66% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 52% 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 Genesis 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Genesis Energy's earnings per share have risen 18% per annum over the last five years. Genesis Energy has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last eight years, Genesis Energy has lifted its dividend by approximately 3.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Genesis Energy is keeping back more of its profits to grow the business.
The Bottom Line
Is Genesis Energy an attractive dividend stock, or better left on the shelf? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Genesis Energy's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 66% and 52% respectively. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.
On that note, you'll want to research what risks Genesis Energy is facing. Every company has risks, and we've spotted 3 warning signs for Genesis Energy (of which 1 is concerning!) you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Valuation is complex, but we're helping make it simple.
Find out whether Genesis Energy is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
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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.
Genesis Energy Limited generates, trades in, and sells electricity to residential and business customers in New Zealand.
Undervalued with solid track record.