QinetiQ Group (LON:QQ.) Is Due To Pay A Dividend Of £0.026
QinetiQ Group plc (LON:QQ.) will pay a dividend of £0.026 on the 2nd of February. The payment will take the dividend yield to 2.6%, which is in line with the average for the industry.
See our latest analysis for QinetiQ Group
QinetiQ Group's Payment Has Solid Earnings Coverage
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, QinetiQ Group was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.
The next year is set to see EPS grow by 60.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.
QinetiQ Group Has A Solid Track Record
The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from £0.038 total annually to £0.077. This means that it has been growing its distributions at 7.3% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.
QinetiQ Group May Find It Hard To Grow The Dividend
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though QinetiQ Group's EPS has declined at around 3.1% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
Our Thoughts On QinetiQ Group's Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While QinetiQ Group is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for QinetiQ Group that investors should take into consideration. Is QinetiQ Group not quite the opportunity you were looking for? Why not check out our selection of top 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.
