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EQT Corporation (NYSE:EQT) has announced that it will pay a dividend of $0.1575 per share on the 2nd of June. This payment means the dividend yield will be 1.2%, which is below the average for the industry.
EQT's Future Dividend Projections Appear Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. The last payment made up 94% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.
According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.
Check out our latest analysis for EQT
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from $0.12 total annually to $0.63. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year 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.
EQT Might Find It Hard To Grow Its Dividend
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 50% per year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which EQT hasn't been doing.
An additional note is that the company has been raising capital by issuing stock equal to 36% of shares outstanding in the last 12 months. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.
Our Thoughts On EQT's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about EQT's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.
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. Just as an example, we've come across 4 warning signs for EQT you should be aware of, and 1 of them is a bit concerning. 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.