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Genco Shipping & Trading Limited (NYSE:GNK) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Genco Shipping & Trading's shares on or after the 18th of November, you won't be eligible to receive the dividend, when it is paid on the 25th of November.
The company's next dividend payment will be US$0.40 per share. Last year, in total, the company distributed US$0.86 to shareholders. Last year's total dividend payments show that Genco Shipping & Trading has a trailing yield of 4.9% on the current share price of US$17.64. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Genco Shipping & Trading has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Genco Shipping & Trading
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Genco Shipping & Trading paid out 98% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. A useful secondary check can be to evaluate whether Genco Shipping & Trading generated enough free cash flow to afford its dividend. Over the past year it paid out 136% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
As Genco Shipping & Trading's dividend was not well covered by either earnings or cash flow, we would be concerned that this dividend could be at risk over the long term.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Genco Shipping & Trading's earnings have been skyrocketing, up 41% per annum for the past five years. Earnings per share have been growing rapidly, but the company is paying out an uncomfortably high percentage of its earnings as dividends. Generally, when a company is growing this quickly and paying out all of its earnings as dividends, it can suggest either that the company is borrowing heavily to fund its growth, or that earnings growth is likely to slow due to lack of reinvestment.