The board of Quixant Plc (LON:QXT) has announced that it will be paying its dividend of $0.03 on the 25th of August, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 1.6%, which is fairly typical for the industry.
See our latest analysis for Quixant
Quixant's Payment Has Solid Earnings Coverage
Unless the payments are sustainable, the dividend yield doesn't mean too much. Quixant is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share is forecast to fall by 16.6% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 23%, which is comfortable for the company to continue in the future.
Quixant's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The annual payment during the last 9 years was $0.0165 in 2014, and the most recent fiscal year payment was $0.0367. This means that it has been growing its distributions at 9.3% 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.
Quixant May Find It Hard To Grow The Dividend
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Quixant has seen earnings per share falling at 3.7% 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.
The Dividend Could Prove To Be Unreliable
In summary, while it's always good to see the dividend being raised, we don't think Quixant's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.
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. For example, we've picked out 2 warning signs for Quixant that investors should know about before committing capital to this stock. Is Quixant not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.