EQT Holdings (ASX:EQT) Will Pay A Larger Dividend Than Last Year At A$0.56

The board of EQT Holdings Limited (ASX:EQT) has announced that it will be paying its dividend of A$0.56 on the 25th of September, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 3.9%, which is fairly typical for the industry.

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EQT Holdings' Future Dividend Projections Appear Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend made up a very large portion of earnings and also represented 78% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but it is still in a reasonable range to continue with.

The next year is set to see EPS grow by 49.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 60%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

See our latest analysis for EQT Holdings

EQT Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from A$0.68 total annually to A$1.12. This means that it has been growing its distributions at 5.1% per annum over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

We Could See EQT Holdings' Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that EQT Holdings has been growing its earnings per share at 6.6% a year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for EQT Holdings for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.