EQT Holdings (ASX:EQT) Is Increasing Its Dividend To AU$0.47

EQT Holdings Limited (ASX:EQT) will increase its dividend on the 5th of October to AU$0.47. The announced payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

See our latest analysis for EQT Holdings

EQT Holdings' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, the company was paying out 103% of what it was earning. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Over the next year, EPS is forecast to expand by 35.0%. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 81%. This is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

EQT Holdings Doesn't Have A Long Payment History

EQT Holdings' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from AU$0.68 in 2016 to the most recent annual payment of AU$0.91. This implies that the company grew its distributions at a yearly rate of about 6.0% over that duration. The dividend has been growing as a reasonable rate, which we like. However, investors will probably want to see a longer track record before they consider EQT Holdings to be a consistent dividend paying stock.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. EQT Holdings hasn't seen much change in its earnings per share over the last five years. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The track record isn't great, and the payments are a bit high to be considered sustainable. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for EQT Holdings that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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