QinetiQ Group (LON:QQ.) Is Due To Pay A Dividend Of £0.026

QinetiQ Group plc (LON:QQ.) has announced that it will pay a dividend of £0.026 per share on the 2nd of February. Based on this payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.

Check out our latest analysis for QinetiQ Group

QinetiQ Group's Dividend Is Well Covered By Earnings

Solid dividend yields are great, but they only really help us if the payment is sustainable. The last dividend was quite comfortably covered by QinetiQ Group's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share is forecast to rise by 60.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

QinetiQ Group Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of £0.038 in 2013 to the most recent total annual payment of £0.077. This works out to be a compound annual growth rate (CAGR) of approximately 7.3% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

QinetiQ Group May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. In the last five years, QinetiQ Group's earnings per share has shrunk at approximately 3.1% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On QinetiQ Group's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments QinetiQ Group has been making. We don't think QinetiQ Group is a great stock to add to your portfolio if income is your focus.

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. As an example, we've identified 1 warning sign for QinetiQ Group that you should be aware of before investing. 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.