Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Qube Holdings Limited (ASX:QUB) has paid a dividend to shareholders. It currently yields 2.3%. Let's dig deeper into whether Qube Holdings should have a place in your portfolio.
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Qube Holdings fare?
Qube Holdings has a trailing twelve-month payout ratio of 42%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect QUB's payout to increase to 67% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.4%. However, EPS is forecasted to fall to A$0.081 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Shareholders would have seen a few years of reduced payments in this time.
In terms of its peers, Qube Holdings has a yield of 2.3%, which is on the low-side for Infrastructure stocks.
If Qube Holdings is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. There are three pertinent aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for QUB’s future growth? Take a look at our free research report of analyst consensus for QUB’s outlook.
- Valuation: What is QUB worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether QUB is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.