Regular readers will know we love our dividends at Simply Wall St, which is why it’s exciting to see GeoPark Limited (NYSE: GPRK) is set to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the latest date by which shareholders must be present on the books of the company to be eligible for payment of a dividend. The ex-dividend date is important because each time a stock is bought or sold, the transaction takes at least two business days to settle. Thus, you can buy GeoPark shares before August 24 in order to collect the dividend that the company will pay on September 8.

The company’s next dividend payment will be $0.13 per share, and over the past 12 months the company has paid a total of $0.51 per share. Based on last year’s payouts, GeoPark has a 3.9% return on the current stock price of $13.14. If you’re buying this company for its dividend, you should get an idea of ​​the reliability and sustainability of GeoPark’s dividend. Therefore, readers should always check if GeoPark was able to increase its dividend or if the dividend could be reduced.

If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. GeoPark only pays out 12% of its after-tax profit, which is comfortably low and leaves plenty of wiggle room in the event of adverse events. Still, cash flow is usually more important than earnings in assessing the sustainability of dividends, so we always need to check whether the company has generated enough cash to pay its dividend. The good news is that it has only paid out 7.1% of its free cash flow over the past year.

It is positive to see GeoPark’s dividend being covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher payout margin. safety before the dividend is cut.

Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.

Have earnings and dividends increased?

When earnings decline, dividend companies become much more difficult to analyze and to own safely. If business goes into a recession and the dividend is cut, the company could see its value drop precipitously. That’s why it’s not ideal to see GeoPark’s earnings per share decline by 3.5% per year over the past five years.

Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. GeoPark has achieved an average annual increase of 46% per year in its dividend, based on the last three years of dividend payments.

The essential

Is GeoPark worth buying for its dividend? GeoPark has comfortably low cash and earnings payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Nevertheless, we consider the decline in earnings to be a warning sign. All in all, not a bad combination, but we believe there are probably more attractive dividend prospects.

In light of this, although GeoPark has an attractive dividend, it is worth knowing the risks associated with this stock. Our analysis shows 3 warning signs for GeoPark which we strongly recommend that you consult before investing in the company.

A common investment mistake is to buy the first good stock you see. Here you can find a complete list of high yielding dividend stocks.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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