Gaztransport & Technigaz (EPA:GTT) Will Pay A Larger Dividend Than Last Year At €2.51

Gaztransport & Technigaz SA (EPA:GTT) will increase its dividend from last year's comparable payment on the 20th of June to €2.51. This takes the annual payment to 4.2% of the current stock price, which is about average for the industry.

View our latest analysis for Gaztransport & Technigaz

Gaztransport & Technigaz's Dividend Is Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. At the time of the last dividend payment, Gaztransport & Technigaz was paying out a very large proportion of what it was earning and 107% of cash flows. This is certainly a risk factor, as reduced cash flows could force the company to pay a lower dividend.

Over the next year, EPS is forecast to expand by 77.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from €3.53 total annually to €5.02. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Gaztransport & Technigaz has been growing its earnings per share at 7.2% a year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Gaztransport & Technigaz's Dividend Doesn't Look Sustainable

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 are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 identified 2 warning signs for Gaztransport & Technigaz (1 doesn't sit too well with us!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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