Q: What are your thoughts on the safety of GXE’s dividend?
5i Research Answer:
GXE now yield more than 12.5%, indicating investors have concerns on the dividend. The small size of the company plus the cyclicality of the business adds risks as well. The dividend has also only been paid for one year now. GXE has $27M in debt, but that's only about three months of cash flow. Payout ratio is about 35%, but this will rise on lower predicted cash flow this year with lower commodity prices. The stock is cheap, but so is th whole sector. Insiders own 6% with no significant insider moves of late. GXE has the 'ability' to keep paying the dividend, but there are no guarantees here. We would consider it OK but if commodity prices slip further management could decide to be conservative and cut.