VH Global Sustainable Energy Opportunities (LON:GSEO) Will Pay A Dividend Of £0.0142

editorial-team@simplywallst.com (Simply Wall St)

Sun, Aug 11, 2024, 2:36 AM 3 min read

VH Global Sustainable Energy Opportunities' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, VH Global Sustainable Energy Opportunities' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 8.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 39% by next year, which we think can be pretty sustainable going forward.

historic-dividend — LSE:GSEO Historic Dividend August 11th 2024

VH Global Sustainable Energy Opportunities Is Still Building Its Track Record

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The annual payment during the last 3 years was £0.025 in 2021, and the most recent fiscal year payment was £0.0568. This implies that the company grew its distributions at a yearly rate of about 31% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that VH Global Sustainable Energy Opportunities has been growing its earnings per share at 8.9% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On VH Global Sustainable Energy Opportunities' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While VH Global Sustainable Energy Opportunities is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for VH Global Sustainable Energy Opportunities (1 makes us a bit uncomfortable!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.