Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.
Global Partners LP Raises Its Dividend Giving the Stock an 8.7% Yield
Global Partners LP (GLP), a large Northeast US gas station supplier, has just raised its dividend today, putting the stock on a forward yield of 8.70%. This makes GLP stock attractive to value investors.
The company announced on Oct. 25 that its quarterly dividend was raised to 62.5 cents, up from 60.5 cents in the prior quarter. This puts the annual dividend rate at $2.50, and since GLP stock is trading at $28.73 today, the yield is 8.70% going forward.
Higher Earnings Expected
Global Partners operates a cadre of 1700 gas stations in New England and New York, that it “owns, leases or supplies.” It also operates terminal networks for gasoline and residual oil distribution. This includes the transport and distribution of renewable fuels.
As the price of gasoline has been rising, the company is able to make money and hence raise its dividend. In effect, this stock is a play on the continuing high cost of fuel and the intractability of inflation in the U.S. right now.
So far the company has not released its Q3 earnings report, expected to be on Nov. 4 before the market opens. But the dividend hike should give comfort to investors that Global Partner's earnings will come in strong, as the dividend was raised over last quarter's level.
Right now analyst forecast EPS this year of $7.17 per share, putting the stock on a forward price-to-earnings (P/E) multiple of just 4.0x. However, next year, assuming the price of gasoline falls, analysts have dramatically lower EPS forecasts of just $2.91, which puts GLP stock on a forward 9.9x multiple.
However, it remains to be seen whether earnings will fall so precipitously next year, especially if inflation and energy prices stay high.
Where This Leaves Investors in GLP Stock
So far this year GLP stock has done well, up over 19% YTD. This includes a 13% gain in the last month, as investors have warmed up to the stock. This is likely due to the prospects of the dividend staying high over the next year.
Investors are therefore getting the best of both worlds. Along with continuing income of 8.7% from the dividend, the stock price has been moving higher.
However, over the last 4 years, the stock has had an average dividend yield of over 11.0%. That could mean that at today's dividend rate, the stock could falter, especially if gasoline prices head lower. So there is some volatility here and downside risk that investors should be careful to avoid if they foresee lower energy prices at any point in the future.
For right now, though, that does not seem to be the case. Investors will get a better look at the company's prospects on Nov. 4 when its Q3 earnings come out.
More Stock Market News from Barchart
- High Inflation Starts to Curb Consumer Spending
- Stocks Rally on a Sharp Decline in Bond Yields
- This Restaurant’s Growth Play Will Drive Stock Higher
- How To Generate Extra Income From Bargain Shoppers
