GNE - Genesis Energy

[blackcap]

dividends are sustainable unlike most business



l[/URL]

How are dividends sustainable when they are greater than net profit? I know cashflows are greater than profit so divs can be paid from there and that is due to depreciation. But what happens when the asset is fully depreciated and you need to spend on the infrastructure to maintain the future cash flows?

[percy]

I must be morphing into the bull cause I'm feeling a sense of caution about the market as everyone piles in chasing yield, metrics are stretched big time in many companies now, there are still value plays out there like OCA and a few others but I reckon keeping one hand on the exit door would be a good stategy to employ going forward.

Agreed.
After selling shares to buy the new house, and then loading up on 18th June last year my combined GNE and MEL [xd] holdings are up 34.855%.Do I sell a few.?
Maybe it is TINA,ie There is no alternative.?
I will also have some further funds to invest in a couple of months.So have been looking for another company or companies to invest in,however I have noticed all the property companies' share prices have moved up.
I have a lot more work to do to find a company on modest ratios that has the capacity to pay increasing dividends.I really do not want to add to my overweight positions in HGH and TRA,but I may be forced to do so.!..lol.

[bull....]

How are dividends sustainable when they are greater than net profit? I know cashflows are greater than profit so divs can be paid from there and that is due to depreciation. But what happens when the asset is fully depreciated and you need to spend on the infrastructure to maintain the future cash flows?

divs are used against free cash flow not net profit. power companies are building wind to increase capacity all from existing cashflows at the moment and have stated no major power stations needed for yrs.

cen pays out 100% of free cash the others dont

[blackcap]

divs are used against free cash flow not net profit. power companies are building wind to increase capacity all from existing cashflows at the moment and have stated no major power stations needed for yrs.

cen pays out 100% of free cash the others dont

I know that. The question is how sustainable is the free cash flow. Because at some point you are going to have to use the cash to build new infrastructure. The depreciation rates are there for a reason, or have the bean counters applied a higher rate than the asset is depreciating by?

[bull....]

I know that. The question is how sustainable is the free cash flow. Because at some point you are going to have to use the cash to build new infrastructure. The depreciation rates are there for a reason, or have the bean counters applied a higher rate than the asset is depreciating by?

i already answered it power companies are already building new generation in nz from existing cash flows also they are getting more power from existing infrastructure.

[blackcap]

i already answered it power companies are already building new generation in nz from existing cash flows also they are getting more power from existing infrastructure.

So borrowing to pay for dividends really.

Are you telling me that the $110m per annum that is left over after dividends and finance expense is enough investment to keep future cash flows per share going?

I see in 2017 they borrowed $500m to be able to purchase some investments worth $355m and pay a dividend of $164m. That does not look like investment from free cash flows.

[RTM]

……….. one hand on the exit door would be a good strategy to employ going forward.

Yes....I've been wondering a bit about the exit door from time to time. I really do wonder how easy it might be to get through it with many of my stocks in the event of a real collapse of prices.
Suspect I'll be left high and dry ! Hopefully with most of the dividends still intact.

[bull....]

So borrowing to pay for dividends really.

Are you telling me that the $110m per annum that is left over after dividends and finance expense is enough investment to keep future cash flows per share going?

I see in 2017 they borrowed $500m to be able to purchase some investments worth $355m and pay a dividend of $164m. That does not look like investment from free cash flows.

no im saying they dont need to build any major power stations at the moment or the fore seeable future . wind farms are very cheap to build than big hydro stations and both mcy and gne have wind projects lined up theres a peak plant due open next yr taranaki , plant up nth land plenty of capacity to meet demand fore seeable future.

none of them borrow to pay divs and of course you would have to borrow to build new infrastructure. cashflow would pay for the int on loan

[bull....]

Dollar drops as markets see rising chance of interest rate cut next month

For the first time in more than six years, more businesses expect a decline in their activity in the next three months than expect an improvement.
The Institute of Economic Research (NZIER) warned the survey showed further downside risk for economic growth, which has already been slowing after two weak quarters in the second half of 2018.


https://www.stuff.co.nz/business/111...the-nz-economy


dont forget the CGT fluffing has stopped many doing any business decisions as well which will affect growth going forward

[bull....]

watch the rba for incase surprise rate cut today