National Bank of Umm Al-Qaiwain (PSC) (ADX:NBQ) Is Increasing Its Dividend To AED0.18

National Bank of Umm Al-Qaiwain (PSC) (ADX:NBQ) will increase its dividend on the 1st of January to AED0.18, which is 20% higher than last year's payment from the same period of AED0.15. The payment will take the dividend yield to 6.6%, which is in line with the average for the industry.

View our latest analysis for National Bank of Umm Al-Qaiwain (PSC)

National Bank of Umm Al-Qaiwain (PSC)'s Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having distributed dividends for at least 10 years, National Bank of Umm Al-Qaiwain (PSC) has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 58%, which means that National Bank of Umm Al-Qaiwain (PSC) would be able to pay its last dividend without pressure on the balance sheet.

Over the next year, EPS could expand by 4.1% if recent trends continue. If the dividend continues along recent trends, we estimate the future payout ratio will be 66%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from AED0.0924 total annually to AED0.15. This means that it has been growing its distributions at 5.0% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 4.1% per year. The company has been growing at a pretty soft 4.1% per annum, and is paying out quite a lot of its earnings to shareholders. This could mean the dividend doesn't have the growth potential we look for going into 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 dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for National Bank of Umm Al-Qaiwain (PSC) that investors should take into consideration. Is National Bank of Umm Al-Qaiwain (PSC) not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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