It looks like EQT Corporation (NYSE:EQT) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase EQT's shares on or after the 7th of May will not receive the dividend, which will be paid on the 2nd of June.

The company's next dividend payment will be US$0.1575 per share, on the back of last year when the company paid a total of US$0.63 to shareholders. Looking at the last 12 months of distributions, EQT has a trailing yield of approximately 1.3% on its current stock price of US$50.36. If you buy this business for its dividend, you should have an idea of whether EQT's dividend is reliable and sustainable. As a result, readers should always check whether EQT has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year EQT paid out 94% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 30% of its free cash flow in the past year.

It's good to see that while EQT's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

See our latest analysis for EQT

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see EQT has grown its earnings rapidly, up 50% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. EQT has delivered 18% dividend growth per year on average over the past 10 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has EQT got what it takes to maintain its dividend payments? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with EQT's paying out such a high percentage of its profit. In summary, it's hard to get excited about EQT from a dividend perspective.

So while EQT looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 4 warning signs for EQT (1 shouldn't be ignored!) that deserve your attention before investing in the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.