Gaztransport & Technigaz (EPA:GTT) Will Pay A Larger Dividend Than Last Year At €3.83

The board of Gaztransport & Technigaz SA (EPA:GTT) has announced that it will be paying its dividend of €3.83 on the 19th of June, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 4.7%, which is in line with the average for the industry.

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Gaztransport & Technigaz's Payment Could Potentially Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Gaztransport & Technigaz's was paying out quite a large proportion of earnings and 95% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

EPS is set to grow by 13.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 75%, which is on the higher side, but certainly still feasible.

See our latest analysis for Gaztransport & Technigaz

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was €3.53 in 2015, and the most recent fiscal year payment was €7.66. This works out to be a compound annual growth rate (CAGR) of approximately 8.1% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Gaztransport & Technigaz might have put its house in order since then, but we remain cautious.

Gaztransport & Technigaz's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Gaztransport & Technigaz has impressed us by growing EPS at 19% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On Gaztransport & Technigaz's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. Strong earnings growth means Gaztransport & Technigaz has the potential to be a good dividend stock in the future, despite the current payments being at elevated levels. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Gaztransport & Technigaz (of which 1 is concerning!) you should know about. Is Gaztransport & Technigaz not quite the opportunity you were looking for? Why not check out our selection of top 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.