Gaztransport & Technigaz (EPA:GTT) Is Paying Out Less In Dividends Than Last Year

Gaztransport & Technigaz SA (EPA:GTT) is reducing its dividend from last year's comparable payment to €1.55 on the 12th of June. This means that the annual payment is 3.2% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Gaztransport & Technigaz

Gaztransport & Technigaz's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Gaztransport & Technigaz's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 96% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

The next year is set to see EPS grow by 129.1%. 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been crawling upwards at 2.1% per year. Gaztransport & Technigaz's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments are bit high to be considered sustainable, and the track record isn't the best. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Gaztransport & Technigaz that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection 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.