Yahoo Finance Gear Energy (TSE:GXE) Is Due To Pay A Dividend Of CA$0.005
Gear Energy Ltd.'s (TSE:GXE) investors are due to receive a payment of CA$0.005 per share on 27th of September. This makes the dividend yield 9.5%, which will augment investor returns quite nicely.
View our latest analysis for Gear Energy
Estimates Indicate Gear Energy's Could Struggle to Maintain Dividend Payments In The Future
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was higher than its profits, and made up 76% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.
EPS is set to grow by 0.9% over the next year if recent trends continue. If the dividend continues on its recent course, the payout ratio in 12 months could be 120%, which is a bit high and could start applying pressure to the balance sheet.
Gear Energy Is Still Building Its Track Record
The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. 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. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
Gear Energy May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. However, Gear Energy's EPS was effectively flat over the past five years, which could stop the company from paying more every year. The earnings growth is anaemic, and the company is paying out 131% of its profit. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.
Gear Energy's Dividend Doesn't Look Sustainable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Gear Energy's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Gear Energy that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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