EQT (STO:EQT) Will Pay A Dividend Of €2.15

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 1.3% of the current stock price, which unfortunately is below what the industry is paying.

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EQT's Future Dividends May Potentially Be At Risk

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, EQT's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand by 143.4%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

Check out 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. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 6 years was €0.206 in 2019, and the most recent fiscal year payment was €0.38. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. 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

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. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that EQT could prove to be a strong dividend payer.

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 12 analysts we track are forecasting for EQT for free with public analyst estimates for the company. 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.