Yahoo Finance Dividend Investors: Don't Be Too Quick To Buy EQT Corporation (NYSE:EQT) For Its Upcoming Dividend
It looks like EQT Corporation (NYSE:EQT) is about to go ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 13th of February will not receive this dividend, which will be paid on the 1st of March.
EQT's next dividend payment will be US$0.03 per share, on the back of last year when the company paid a total of US$0.12 to shareholders. Calculating the last year's worth of payments shows that EQT has a trailing yield of 2.3% on the current share price of $5.3. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether EQT has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for EQT
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. EQT lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Luckily it paid out just 23% of its free cash flow last year.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. EQT was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. EQT's dividend payments per share have declined at 18% per year on average over the past ten years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
We update our analysis on EQT every 24 hours, so you can always get the latest insights on its financial health, here.
To Sum It Up
Is EQT worth buying for its dividend? It's hard to get used to EQT paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: EQT has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
Wondering what the future holds for EQT? See what the ten analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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