Gibson Energy (TSE:GEI) Has Affirmed Its Dividend Of CA$0.35

Simply Wall St
·2 min read

The board of Gibson Energy Inc. (TSE:GEI) has announced that it will pay a dividend of CA$0.35 per share on the 15th of October. The dividend yield will be 6.3% based on this payment which is still above the industry average.

See our latest analysis for Gibson Energy

Gibson Energy Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 58.3%. If the dividend continues on its recent course, the payout ratio in 12 months could be 137%, which is a bit high and could start applying pressure to the balance sheet.

historic-dividend
historic-dividend

Gibson Energy Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The first annual payment during the last 10 years was CA$0.96 in 2011, and the most recent fiscal year payment was CA$1.40. This implies that the company grew its distributions at a yearly rate of about 3.8% over that duration. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Gibson Energy's Dividend Might Lack Growth

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Gibson Energy has seen EPS rising for the last five years, at 69% per annum. EPS has been growing well, but Gibson Energy has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

The Dividend Could Prove To Be Unreliable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 5 warning signs for Gibson Energy you should be aware of, and 2 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

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