Quadient (EPA:QDT) Is Paying Out A Larger Dividend Than Last Year

Quadient S.A. (EPA:QDT) has announced that it will be increasing its dividend on the 8th of August to €0.55. This takes the dividend yield from 3.4% to 3.4%, which shareholders will be pleased with.

Check out our latest analysis for Quadient

Quadient's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, Quadient's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 4.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 13%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The first annual payment during the last 10 years was €3.90 in 2012, and the most recent fiscal year payment was €0.55. This works out to a decline of approximately 86% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Quadient has seen earnings per share falling at 4.2% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On Quadient's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Quadient's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Quadient that investors should take into consideration. 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.