GeoPark (NYSE:GPRK) Will Pay A Dividend Of $0.147

GeoPark Limited's (NYSE:GPRK) investors are due to receive a payment of $0.147 per share on 12th of September. This will take the dividend yield to an attractive 6.3%, providing a nice boost to shareholder returns.

See our latest analysis for GeoPark

GeoPark's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, GeoPark's dividend was comfortably covered by both cash flow and earnings. 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 rise by 51.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

GeoPark's Dividend Has Lacked Consistency

It's comforting to see that GeoPark has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The annual payment during the last 5 years was $0.165 in 2019, and the most recent fiscal year payment was $0.588. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. 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's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings has been rising at 3.7% per annum over the last five years, which admittedly is a bit slow. While EPS growth is quite low, GeoPark has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On GeoPark's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for GeoPark that investors should know about before committing capital to this stock. Is GeoPark not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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