EQT's (STO:EQT) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of EQT AB (publ) (STO:EQT) has announced that it will be paying its dividend of €2.15 on the 4th of June, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.2%.

Check out our latest analysis for EQT

EQT's Future Dividends May Potentially Be At Risk

If it is predictable over a long period, even low dividend yields can be attractive. The last payment was quite easily covered by earnings, but it made up 98% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next 12 months is set to see EPS grow by 177.1%. 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.

EQT's Dividend Has Lacked Consistency

Looking back, EQT's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of €0.206 in 2020 to the most recent total annual payment of €0.374. This means that it has been growing its distributions at 13% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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'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.

In Summary

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. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for EQT that investors should take into consideration. 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.