Income Investors Should Know That Genesis Energy Limited (NZSE:GNE) Goes Ex-Dividend Soon

It looks like Genesis Energy Limited (NZSE:GNE) is about to go ex-dividend in the next 4 days. The ex-dividend date is commonly two business days 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Genesis Energy's shares before the 19th of March in order to be eligible for the dividend, which will be paid on the 10th of April.

The company's upcoming dividend is NZ$0.0838823 a share, following on from the last 12 months, when the company distributed a total of NZ$0.14 per share to shareholders. Based on the last year's worth of payments, Genesis Energy stock has a trailing yield of around 6.2% on the current share price of NZ$2.27. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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 Genesis Energy

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Genesis Energy paid out 94% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 54% of its free cash flow as dividends, within the usual range for most companies.

It's good to see that while Genesis Energy's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Genesis Energy's earnings have been skyrocketing, up 21% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Genesis Energy has increased its dividend at approximately 0.6% 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.

To Sum It Up

Has Genesis Energy got what it takes to maintain its dividend payments? Genesis Energy has been growing its earnings per share nicely, although judging by the difference between its profit and cashflow payout ratios, the company might have reported some write-offs over the last year. To summarise, Genesis Energy looks okay on this analysis, although it doesn't appear a stand-out opportunity.

If you're not too concerned about Genesis Energy's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For instance, we've identified 3 warning signs for Genesis Energy (1 is concerning) you should be aware of.

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.