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GeoPark Limited (NYSE:GPRK) has announced that it will be increasing its dividend from last year's comparable payment on the 7th of September to $0.132. Based on this payment, the dividend yield for the company will be 5.1%, which is fairly typical for the industry.
View our latest analysis for GeoPark
GeoPark's Dividend Is Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, GeoPark was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to fall by 8.6% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 29%, which is comfortable for the company to continue in the future.
GeoPark's Dividend Has Lacked Consistency
Even in its short history, we have seen the dividend cut. The annual payment during the last 4 years was $0.165 in 2019, and the most recent fiscal year payment was $0.52. This implies that the company grew its distributions at a yearly rate of about 33% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. GeoPark has impressed us by growing EPS at 27% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We Really Like GeoPark's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for GeoPark you should be aware of, and 1 of them is significant. Is GeoPark not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.