Read This Before Considering Green Plains Inc. (NASDAQ:GPRE) For Its Upcoming US$0.12 Dividend
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Have you been keeping an eye on Green Plains Inc.’s (NASDAQ:GPRE) upcoming dividend of US$0.12 per share payable on the 15 March 2019? Then you only have 4 days left before the stock starts trading ex-dividend on the 21 February 2019. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Green Plains’s most recent financial data to examine its dividend characteristics in more detail.
View our latest analysis for Green Plains
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is it paying an annual yield above 75% of dividend payers?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share risen in the past couple of years?
Can it afford to pay the current rate of dividends from its earnings?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Green Plains fit our criteria?
The current trailing twelve-month payout ratio for GPRE is 122%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a higher payout ratio of 137% which, assuming the share price stays the same, leads to a dividend yield of 3.4%. However, EPS is forecasted to fall to $-1.0 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Unfortunately, it is really too early to view Green Plains as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Green Plains generates a yield of 3.2%, which is on the low-side for Oil and Gas stocks.
Next Steps:
After digging a little deeper into Green Plains’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three key aspects you should look at:
Future Outlook: What are well-informed industry analysts predicting for GPRE’s future growth? Take a look at our free research report of analyst consensus for GPRE’s outlook.
Historical Performance: What has GPRE’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
