QinetiQ Group (LON:QQ.) Will Pay A Larger Dividend Than Last Year At £0.0565

QinetiQ Group plc (LON:QQ.) will increase its dividend on the 22nd of August to £0.0565, which is 6.6% higher than last year's payment from the same period of £0.053. This takes the annual payment to 1.8% of the current stock price, which is about average for the industry.

Check out our latest analysis for QinetiQ Group

QinetiQ Group's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, QinetiQ Group's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 45.5%. If the dividend continues on this path, the payout ratio could be 24% by next year, which we think can be pretty sustainable going forward.

QinetiQ Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was £0.041 in 2014, and the most recent fiscal year payment was £0.0825. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. 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

The company's investors will be pleased to have been receiving dividend income for some time. However, QinetiQ Group has only grown its earnings per share at 4.1% per annum over the past five years. While EPS growth is quite low, QinetiQ Group has the option to increase the payout ratio to return more cash to shareholders.

We Really Like QinetiQ Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for QinetiQ Group for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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