Yahoo Finance Is It Smart To Buy GeoPark Limited (NYSE:GPRK) Before It Goes Ex-Dividend?
Readers hoping to buy GeoPark Limited (NYSE:GPRK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 24th of March will not receive the dividend, which will be paid on the 8th of April.
GeoPark's next dividend payment will be US$0.041 per share, on the back of last year when the company paid a total of US$0.16 to shareholders. Based on the last year's worth of payments, GeoPark stock has a trailing yield of around 2.6% on the current share price of $6.29. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for GeoPark
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. GeoPark has a low and conservative payout ratio of just 4.3% of its income after tax. A useful secondary check can be to evaluate whether GeoPark generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 2.2% of its cash flow last year.
It's positive to see that GeoPark's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see GeoPark has grown its earnings rapidly, up 46% a year for the past five years. GeoPark looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
This is GeoPark's first year of paying a dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.
The Bottom Line
Is GeoPark an attractive dividend stock, or better left on the shelf? We love that GeoPark is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. GeoPark looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
So while GeoPark looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 3 warning signs with GeoPark and understanding them should be part of your investment process.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
