Gibson Energy (TSE:GEI) Will Pay A Dividend Of CA$0.35

Gibson Energy Inc. (TSE:GEI) will pay a dividend of CA$0.35 on the 15th of October. This means the annual payment is 5.9% of the current stock price, which is above the average for the industry.

View our latest analysis for Gibson Energy

Gibson Energy Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 212% of what it was earning. 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 59.1%. If the dividend continues on its recent course, the payout ratio in 12 months could be 136%, which is a bit high and could start applying pressure to the balance sheet.

Gibson Energy Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. 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 means that it has been growing its distributions at 3.8% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

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. Although earnings per share is up nicely Gibson Energy is paying out 212% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

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. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Gibson Energy (of which 2 are a bit concerning!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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