Gaztransport & Technigaz's (EPA:GTT) Shareholders Will Receive A Smaller Dividend Than Last Year

Gaztransport & Technigaz SA (EPA:GTT) is reducing its dividend to €1.75 on the 8th of June. This payment takes the dividend yield to 2.4%, which only provides a modest boost to overall returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Gaztransport & Technigaz's stock price has increased by 39% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Gaztransport & Technigaz

Gaztransport & Technigaz Is Paying Out More Than It Is Earning

If it is predictable over a long period, even low dividend yields can be attractive. The last payment made up 85% 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.

Looking forward, earnings per share is forecast to fall by 5.9% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 97%, which could put the dividend under pressure if earnings don't start to improve.

Gaztransport & Technigaz's Dividend Has Lacked Consistency

Looking back, Gaztransport & Technigaz's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the first annual payment was €3.53, compared to the most recent full-year payment of €3.10. The dividend has shrunk at around 1.6% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Gaztransport & Technigaz May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been crawling upwards at 2.4% 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.

Our Thoughts On Gaztransport & Technigaz's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Gaztransport & Technigaz is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Gaztransport & Technigaz 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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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.