Genco Shipping & Trading's (NYSE:GNK) Upcoming Dividend Will Be Larger Than Last Year's

Genco Shipping & Trading Limited (NYSE:GNK) will increase its dividend on the 30th of May to $0.42, which is 180% higher than last year's payment from the same period of $0.15. Although the dividend is now higher, the yield is only 3.8%, which is below the industry average.

Check out our latest analysis for Genco Shipping & Trading

Genco Shipping & Trading's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Analysts expect a massive rise in earnings per share in the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 63% which is fairly 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. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. 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.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Genco Shipping & Trading's earnings per share has shrunk at 27% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

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

Overall, while the dividend being raised can be good, there are some concerns about its long term sustainability. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

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. Just as an example, we've come across 4 warning signs for Genco Shipping & Trading you should be aware of, and 1 of them shouldn't be ignored. 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.