Quarterhill (TSE:QTRH) Has Affirmed Its Dividend Of CA$0.0125

The board of Quarterhill Inc. (TSE:QTRH) has announced that it will pay a dividend on the 7th of October, with investors receiving CA$0.0125 per share. This payment means that the dividend yield will be 2.5%, which is around the industry average.

View our latest analysis for Quarterhill

Quarterhill Might Find It Hard To Continue The Dividend

We aren't too impressed by dividend yields unless they can be sustained over time. Before making this announcement, Quarterhill was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is forecast to fall by 119.2% over the next year. This means that the company will be unprofitable, but cash flows are more important when considering the dividend and as the current cash payout ratio is pretty healthy, we don't think there is too much reason to worry.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was CA$0.10 in 2012, and the most recent fiscal year payment was CA$0.05. Doing the maths, this is a decline of about 6.7% per year. 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 Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's encouraging to see that Quarterhill has been growing its earnings per share at 25% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Quarterhill's Dividend

Overall, we like to see the dividend staying consistent, and we think Quarterhill might even raise payments in the future. The earnings easily cover the company's distributions, and the company is generating plenty of cash. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Quarterhill that investors should take into consideration. Is Quarterhill 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.