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Why You Might Be Interested In Genie Energy Ltd. (NYSE:GNE) For Its Upcoming Dividend
It looks like Genie Energy Ltd. (NYSE:GNE) is about to go ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Genie Energy's shares on or after the 13th of November will not receive the dividend, which will be paid on the 23rd of November.
The company's upcoming dividend is US$0.075 a share, following on from the last 12 months, when the company distributed a total of US$0.30 per share to shareholders. Based on the last year's worth of payments, Genie Energy has a trailing yield of 1.7% on the current stock price of US$17.72. If you buy this business for its dividend, you should have an idea of whether Genie Energy's dividend is reliable and sustainable. As a result, readers should always check whether Genie Energy has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Genie Energy is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out more than half (65%) of its free cash flow in the past year, which is within an average range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Check out our latest analysis for Genie Energy
Click here to see how much of its profit Genie Energy paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Genie Energy has grown its earnings rapidly, up 25% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Genie Energy has increased its dividend at approximately 2.3% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Genie Energy is keeping back more of its profits to grow the business.
To Sum It Up
Is Genie Energy an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. There's a lot to like about Genie Energy, and we would prioritise taking a closer look at it.
So while Genie Energy looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, Genie Energy has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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