National Bank of Ras Al-Khaimah (P.S.C.)'s (ADX:RAKBANK) Dividend Will Be Increased To د.إ0.23

The National Bank of Ras Al-Khaimah (P.S.C.) (ADX:RAKBANK) will increase its dividend on the 1st of January to د.إ0.23. This will take the dividend yield from 4.5% to 4.5%, providing a nice boost to shareholder returns.

See our latest analysis for National Bank of Ras Al-Khaimah (P.S.C.)

National Bank of Ras Al-Khaimah (P.S.C.)'s Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, National Bank of Ras Al-Khaimah (P.S.C.)'s earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 12.7% over the next year. If the dividend continues on this path, the payout ratio could be 38% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the dividend has gone from د.إ0.25 to د.إ0.23. Payments have been decreasing at a very slow pace in this time period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, National Bank of Ras Al-Khaimah (P.S.C.) has only grown its earnings per share at 2.8% per annum over the past five years. Growth of 2.8% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think National Bank of Ras Al-Khaimah (P.S.C.)'s payments are rock solid. While National Bank of Ras Al-Khaimah (P.S.C.) is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for National Bank of Ras Al-Khaimah (P.S.C.) that you should be aware of before investing. Is National Bank of Ras Al-Khaimah (P.S.C.) not quite the opportunity you were looking for? Why not check out 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.