DT Midstream (NYSE:DTM) Has Announced That It Will Be Increasing Its Dividend To $0.735

DT Midstream, Inc.'s (NYSE:DTM) dividend will be increasing from last year's payment of the same period to $0.735 on 15th of April. Based on this payment, the dividend yield for the company will be 5.2%, which is fairly typical for the industry.

View our latest analysis for DT Midstream

DT Midstream's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, DT Midstream's dividend was only 70% of earnings, however it was paying out 1,097% of free 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 year is set to see EPS grow by 17.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 60% by next year, which is in a pretty sustainable range.

DT Midstream Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 3 years, which isn't that long in the grand scheme of things. The annual payment during the last 3 years was $2.40 in 2021, and the most recent fiscal year payment was $2.94. This works out to be a compound annual growth rate (CAGR) of approximately 7.0% a year over that time. DT Midstream has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

We Could See DT Midstream's Dividend Growing

The company's investors will be pleased to have been receiving dividend income for some time. DT Midstream has impressed us by growing EPS at 7.1% per year over the past three years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On DT Midstream's Dividend

In summary, while it's always good to see the dividend being raised, we don't think DT Midstream's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for DT Midstream that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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