QinetiQ Group's (LON:QQ.) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of QinetiQ Group plc (LON:QQ.) has announced that the dividend on 3rd of February will be increased to £0.024, which will be 4.3% higher than last year's payment of £0.023 which covered the same period. This takes the annual payment to 2.1% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for QinetiQ Group

QinetiQ Group's Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, QinetiQ Group was easily earning enough to 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 fall by 20.4%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 31%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. QinetiQ Group has seen EPS rising for the last five years, at 5.3% per annum. 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

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for QinetiQ Group you should be aware of, and 1 of them is potentially serious. 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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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.