Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. In the past, Qantm Intellectual Property Limited (ASX:QIP) has returned an average of 7.00% per year to investors in the form of dividend payouts. Does Qantm Intellectual Property tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for Qantm Intellectual Property
5 checks you should use to assess a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it paying an annual yield above 75% of dividend payers?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share risen in the past couple of years?
- Does earnings amply cover its dividend payments?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Qantm Intellectual Property fare?The current trailing twelve-month payout ratio for QIP is 100.85%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 79.76%, leading to a dividend yield of 7.85%. Moreover, EPS should increase to A$0.10, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view Qantm Intellectual Property as a dividend investment. Last year was the company’s first dividend payment, so it is certainly early days. The standard practice for reliable payers is to look for 10 or so years of track record. Relative to peers, Qantm Intellectual Property produces a yield of 7.17%, which is high for Professional Services stocks.
If Qantm Intellectual Property is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for QIP’s future growth? Take a look at our free research report of analyst consensus for QIP’s outlook.
- Valuation: What is QIP worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether QIP is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.