Gaztransport & Technigaz (EPA:GTT) Has Announced That It Will Be Increasing Its Dividend To €1.85

Gaztransport & Technigaz SA (EPA:GTT) will increase its dividend on the 14th of December to €1.85, which is 19% higher than last year's payment from the same period of €1.55. Although the dividend is now higher, the yield is only 2.8%, which is below the industry average.

View our latest analysis for Gaztransport & Technigaz

Gaztransport & Technigaz's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. The last payment made up 84% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 115.5%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 41% which would be quite comfortable going to take the dividend forward.

Gaztransport & Technigaz's Dividend Has Lacked Consistency

Looking back, Gaztransport & Technigaz's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2014, the dividend has gone from €3.53 total annually to €3.10. This works out to be a decline of approximately 1.4% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Gaztransport & Technigaz has only grown its earnings per share at 2.6% per annum over the past five years. Slow growth and a high payout ratio could mean that Gaztransport & Technigaz has maxed out the amount that it has been able to pay to shareholders. When the rate of return on reinvestment opportunities falls below a certain minimum level, companies often elect to pay a larger dividend instead. This is why many mature companies often have larger dividend yields.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Gaztransport & Technigaz's payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. For example, we've picked out 1 warning sign for Gaztransport & Technigaz that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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