It depends on what you mean by "propagation of energy." Usually when we think of energy propagating, there is an non-constant distribution of energy in space, and so you can follow features of that distribution to see which way the energy is moving. For example, in an electromagnetic wave, the energy density as a function of position takes a sinusoidal form, $u\sim\sin^2 kx$, and you can follow the peaks and troughs in this distribution over time to see the movement of the wave.
But you can easily have a configuration in which there is no such feature in the energy distribution to follow; for example, if the energy distribution is constant in time, or if it fluctuates in a way that doesn't correspond to a wave. In these cases, all you can say about energy is how the amount of it in some particular region changes with time. That quantity is related to the divergence of the Poynting vector,
$$\frac{\partial u}{\partial t} = -\nabla\cdot\vec{S}$$
(in empty space), so as far as the energy distribution is concerned, it's only the divergence of $\vec{S}$ that matters, not its value. From Wikipedia:
The Poynting vector is usually interpreted as an energy flux, but this is only strictly correct for electromagnetic radiation. The more general case is described by Poynting's theorem above, where it occurs as a divergence, which means that it can only describe the change of energy density in space, rather than the flow.
In your case, the divergence of $\vec{S}$ is zero everywhere, which means there is no net increase or decrease in the amount of energy at any one spot. You can imagine this as a constant flow of energy in one direction, if it really makes you feel better, but you can just as well imagine it as no energy flow at all. The distinction is physically irrelevant. The truth is that energy flow is not even a well-defined concept for a featureless energy distribution.
However, the Poynting vector does have a different interpretation as the momentum density of the EM field. Momentum is a vector, so it does have a direction, and you can meaningfully talk about a "momentum propagation" (loosely speaking). When you calculate that $\vec{S} \neq 0$, what you're finding is that the EM field of this configuration does have a nonzero momentum density. However, the momentum normally has no effect because it never gets transferred to anything. If you put something that interacts with the EM field in its way, though, the object will experience radiation pressure.