Queen's Road Capital Investment (TSE:QRC) Will Pay A Larger Dividend Than Last Year At $0.23

Queen's Road Capital Investment Ltd. (TSE:QRC) has announced that it will be increasing its dividend from last year's comparable payment on the 13th of November to $0.23. This takes the annual payment to 2.2% of the current stock price, which is about average for the industry.

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Queen's Road Capital Investment's Distributions May Be Difficult To Sustain

Solid dividend yields are great, but they only really help us if the payment is sustainable. Queen's Road Capital Investment is not generating a profit, and despite this is paying out most of its free cash flow as a dividend. Generally it is unsustainable for a company to be paying a dividend while unprofitable, and with limited reinvestment into the business growth may be slow.

Recent, EPS has fallen by 12.4%, so this could continue over the next year. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

Check out our latest analysis for Queen's Road Capital Investment

Queen's Road Capital Investment Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. Since 2021, the dividend has gone from $0.108 total annually to $0.144. This means that it has been growing its distributions at 7.5% per annum over that time. Queen's Road Capital Investment has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Has Limited Growth Potential

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. Queen's Road Capital Investment's EPS has fallen by approximately 12% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Queen's Road Capital Investment's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Queen's Road Capital Investment's payments are rock solid. The track record isn't great, and the payments are a bit high to be considered sustainable. 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. For example, we've picked out 3 warning signs for Queen's Road Capital Investment that investors should know about before committing capital to this stock. Is Queen's Road Capital Investment not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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