EQT (STO:EQT) Is Due To Pay A Dividend Of €2.15

The board of EQT AB (publ) (STO:EQT) has announced that it will pay a dividend on the 4th of December, with investors receiving €2.15 per share. Even though the dividend went up, the yield is still quite low at only 1.3%.

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Estimates Indicate EQT's Could Struggle to Maintain Dividend Payments In The Future

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, EQT was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 123.7%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Check out our latest analysis for EQT

EQT's Dividend Has Lacked Consistency

It's comforting to see that EQT has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2020, the annual payment back then was €0.206, compared to the most recent full-year payment of €0.38. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. EQT has impressed us by growing EPS at 41% per year over the past five years. EQT is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On EQT's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 13 analysts we track are forecasting for EQT for free with public analyst estimates for the company. Is EQT not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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