EQT (STO:EQT) Is Increasing Its Dividend To €2.15

EQT AB (publ) (STO:EQT) will increase its dividend from last year's comparable payment on the 4th of June to €2.15. This takes the annual payment to 1.7% of the current stock price, which is about average for the industry.

Our free stock report includes 1 warning sign investors should be aware of before investing in EQT. Read for free now.

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

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last payment was quite easily covered by earnings, but it made up 103% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Over the next year, EPS is forecast to expand by 165.7%. 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.

See our latest analysis for EQT

EQT's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2020, the dividend has gone from €0.206 total annually to €0.386. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that EQT has grown earnings per share at 30% per year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

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 EQT is earning enough to cover the payments, the cash flows are lacking. We don't think EQT is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for EQT that investors should take into consideration. Is EQT not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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