QANTM Intellectual Property (ASX:QIP) Will Pay A Dividend Of A$0.035

QANTM Intellectual Property Limited (ASX:QIP) has announced that it will pay a dividend of A$0.035 per share on the 4th of October. This means the annual payment is 6.5% of the current stock price, which is above the average for the industry.

Check out our latest analysis for QANTM Intellectual Property

QANTM Intellectual Property's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, QANTM Intellectual Property's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

The next year is set to see EPS grow by 117.0%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 52% which brings it into quite a comfortable range.

QANTM Intellectual Property's Dividend Has Lacked Consistency

It's comforting to see that QANTM Intellectual Property has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2017, the dividend has gone from A$0.072 total annually to A$0.063. This works out to be a decline of approximately 2.2% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. In the last five years, QANTM Intellectual Property's earnings per share has shrunk at approximately 4.6% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about QANTM Intellectual Property'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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for QANTM Intellectual Property that investors need to be conscious of moving forward. 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.