Genco Shipping & Trading (NYSE:GNK) Is Paying Out A Larger Dividend Than Last Year

The board of Genco Shipping & Trading Limited (NYSE:GNK) has announced that it will be paying its dividend of $0.40 on the 25th of November, an increased payment from last year's comparable dividend. This takes the annual payment to 4.9% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Genco Shipping & Trading

Genco Shipping & Trading's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, the company was paying out 98% of what it was earning and 88% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

Over the next year, EPS is forecast to expand by 48.0%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 87% which is a bit high but can definitely be sustainable.

Genco Shipping & Trading's Dividend Has Lacked Consistency

Genco Shipping & Trading has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from $0.70 total annually to $0.86. This works out to be a compound annual growth rate (CAGR) of approximately 4.2% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Could Be Constrained

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. Genco Shipping & Trading has seen EPS rising for the last five years, at 41% per annum. Strong earnings is nice to see, but unless this can be sustained on minimal reinvestment of profits, we would question whether dividends will follow suit.

Genco Shipping & Trading's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Genco Shipping & Trading will make a great income stock. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Genco Shipping & Trading that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of 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.