QinetiQ Group (LON:QQ.) Will Pay A Larger Dividend Than Last Year At £0.024

QinetiQ Group plc's (LON:QQ.) periodic dividend will be increasing on the 3rd of February to £0.024, with investors receiving 4.3% more than last year's £0.023. This takes the annual payment to 2.1% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for QinetiQ Group

QinetiQ Group's Dividend Is 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, QinetiQ Group was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to fall by 11.6%. If the dividend continues along recent trends, we estimate the payout ratio could be 28%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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 £0.04 in 2012, and the most recent fiscal year payment was £0.074. This means that it has been growing its distributions at 6.3% per annum over that time. 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 Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. QinetiQ Group has impressed us by growing EPS at 5.3% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for QinetiQ Group's prospects of growing its dividend payments in the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, QinetiQ Group has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is QinetiQ Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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