Why You Might Be Interested In GeoPark Limited (NYSE:GPRK) For Its Upcoming Dividend

GeoPark Limited (NYSE:GPRK) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Accordingly, GeoPark investors that purchase the stock on or after the 29th of August will not receive the dividend, which will be paid on the 12th of September.

The company's next dividend payment will be US$0.147 per share. Last year, in total, the company distributed US$0.59 to shareholders. Calculating the last year's worth of payments shows that GeoPark has a trailing yield of 6.4% on the current share price of US$9.13. If you buy this business for its dividend, you should have an idea of whether GeoPark's dividend is reliable and sustainable. 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 GeoPark

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. Fortunately GeoPark's payout ratio is modest, at just 28% of profit. 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. It paid out 22% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that GeoPark'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. Fortunately for readers, GeoPark's earnings per share have been growing at 12% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. GeoPark has delivered 29% dividend growth per year on average over the past five years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

From a dividend perspective, should investors buy or avoid GeoPark? It's great that GeoPark is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. GeoPark looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while GeoPark has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for GeoPark that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.