GeoPark (NYSE:GPRK) Is Paying Out A Larger Dividend Than Last Year

The board of GeoPark Limited (NYSE:GPRK) has announced that it will be paying its dividend of $0.132 on the 7th of September, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 5.1%.

View our latest analysis for GeoPark

GeoPark's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, GeoPark's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to fall by 8.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 29%, which we are pretty comfortable with and we think is feasible on an earnings basis.

GeoPark's Dividend Has Lacked Consistency

The track record isn't the longest, but we are already seeing a bit of instability in the payments. The annual payment during the last 4 years was $0.165 in 2019, and the most recent fiscal year payment was $0.52. This means that it has been growing its distributions at 33% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. GeoPark has seen EPS rising for the last five years, at 27% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

GeoPark Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for GeoPark (of which 1 is potentially serious!) you should know about. 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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