EQT Corporation (NYSE:EQT) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase EQT's shares on or after the 18th of February, you won't be eligible to receive the dividend, when it is paid on the 3rd of March.

The company's next dividend payment will be US$0.1575 per share, and in the last 12 months, the company paid a total of US$0.63 per share. Looking at the last 12 months of distributions, EQT has a trailing yield of approximately 1.2% on its current stock price of US$52.37. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether EQT can afford its dividend, and if the dividend could grow.

View our latest analysis for EQT

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Last year, EQT paid out 93% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. A useful secondary check can be to evaluate whether EQT generated enough free cash flow to afford its dividend. Dividends consumed 60% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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.

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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see EQT's earnings have been skyrocketing, up 51% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its 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.

The Bottom Line

Is EQT an attractive dividend stock, or better left on the shelf? EQT has been growing its earnings per share nicely, although judging by the difference between its profit and cashflow payout ratios, the company might have reported some write-offs over the last year. To summarise, EQT looks okay on this analysis, although it doesn't appear a stand-out opportunity.

So if you want to do more digging on EQT, you'll find it worthwhile knowing the risks that this stock faces. For example, EQT has 5 warning signs (and 2 which make us uncomfortable) we think you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.