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 of €2.15 per share on the 4th of December. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

EQT's Projections Indicate Future Payments May Be Unsustainable

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, EQT's earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to expand by 142.5%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

View our latest analysis for EQT

EQT's Dividend Has Lacked Consistency

EQT has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 5 years was €0.206 in 2020, and the most recent fiscal year payment was €0.38. This means that it has been growing its distributions at 13% per annum over that time. EQT has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

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. 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, we always like to see the dividend being raised, but we don't think EQT will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 11 EQT analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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.