QinetiQ Group plc's (LON:QQ.) periodic dividend will be increasing on the 22nd of August to ￡0.0565, with investors receiving 6.6% more than last year's ￡0.053. Based on this payment, the dividend yield for the company will be 1.8%, which is fairly typical for the industry.

See 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. 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.

Looking forward, earnings per share is forecast to rise by 39.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 25% by next year, which is in a pretty sustainable range.

QinetiQ Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. 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. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

QinetiQ Group May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings has been rising at 4.0% per annum over the last five years, which admittedly is a bit slow. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

QinetiQ Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for QinetiQ Group for free with public analyst estimates for the company. Is QinetiQ Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.