Yahoo Finance Gear Energy (TSE:GXE) Is Due To Pay A Dividend Of CA$0.005
The board of Gear Energy Ltd. (TSE:GXE) has announced that it will pay a dividend of CA$0.005 per share on the 29th of March. This means the annual payment is 9.0% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Gear Energy
Gear 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. Prior to this announcement, the company was paying out 290% of what it was earning. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.
Over the next year, EPS could expand by 5.4% if the company continues along the path it has been on recently. If the dividend continues on its recent course, the payout ratio in 12 months could be 232%, which is a bit high and could start applying pressure to the balance sheet.
Gear Energy Doesn't Have A Long Payment History
The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. The annual payment during the last 2 years was CA$0.04 in 2022, and the most recent fiscal year payment was CA$0.06. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. Gear Energy has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
Gear Energy May Have Challenges Growing The Dividend
Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Gear Energy has been growing its earnings per share at 5.4% a year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.
Gear Energy's Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Gear Energy you should be aware of, and 1 of them is concerning. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
