Gaztransport & Technigaz's (EPA:GTT) Dividend Will Be Increased To €3.83

Gaztransport & Technigaz SA (EPA:GTT) has announced that it will be increasing its dividend from last year's comparable payment on the 19th of June to €3.83. Based on this payment, the dividend yield for the company will be 5.6%, which is fairly typical for the industry.

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Gaztransport & Technigaz's Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend made up a very large portion of earnings and also represented 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.

Earnings per share is forecast to rise by 11.3% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 77% which is a bit high but can definitely be sustainable.

See our latest analysis for Gaztransport & Technigaz

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was €3.53, compared to the most recent full-year payment of €7.66. This works out to be a compound annual growth rate (CAGR) of approximately 8.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth Could Be Constrained

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. It's encouraging to see that Gaztransport & Technigaz has been growing its earnings per share at 19% 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.

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. 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 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. Case in point: We've spotted 2 warning signs for Gaztransport & Technigaz (of which 1 is a bit unpleasant!) you should know about. 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.