Yahoo Finance Why It Might Not Make Sense To Buy Quartix Technologies plc (LON:QTX) For Its Upcoming Dividend
Readers hoping to buy Quartix Technologies plc (LON:QTX) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Quartix Technologies investors that purchase the stock on or after the 28th of March will not receive the dividend, which will be paid on the 29th of April.
The company's upcoming dividend is UK£0.015 a share, following on from the last 12 months, when the company distributed a total of UK£0.03 per share to shareholders. Based on the last year's worth of payments, Quartix Technologies stock has a trailing yield of around 1.8% on the current share price of UK£1.67. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Quartix Technologies
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Quartix Technologies paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Over the past year it paid out 116% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
Click here to see how much of its profit Quartix Technologies paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Quartix Technologies reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Quartix Technologies's dividend payments are broadly unchanged compared to where they were nine years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
Get our latest analysis on Quartix Technologies's balance sheet health here.
Final Takeaway
From a dividend perspective, should investors buy or avoid Quartix Technologies? It's hard to get used to Quartix Technologies paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Quartix Technologies.
Curious about whether Quartix Technologies has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
If you're in the market for strong dividend payers, we recommend checking 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.
