Qube Holdings' (ASX:QUB) Shareholders Will Receive A Bigger Dividend Than Last Year

Qube Holdings Limited's (ASX:QUB) dividend will be increasing from last year's payment of the same period to A$0.0515 on 15th of October. Even though the dividend went up, the yield is still quite low at only 2.4%.

Check out our latest analysis for Qube Holdings

Qube Holdings' Future Dividend Projections Appear Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Qube Holdings was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. Generally, we think that this would be a risky long term practice.

Looking forward, earnings per share is forecast to rise by 46.1% over the next year. If the dividend continues on this path, the payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of A$0.048 in 2014 to the most recent total annual payment of A$0.0915. This implies that the company grew its distributions at a yearly rate of about 6.7% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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. Although it's important to note that Qube Holdings' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Slow growth and a high payout ratio could mean that Qube Holdings has maxed out the amount that it has been able to pay to shareholders. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Qube Holdings' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Qube Holdings is a great stock to add to your portfolio if income is your focus.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 15 Qube Holdings analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Qube Holdings 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.