National Bank of Ras Al-Khaimah (P.S.C.)'s (ADX:RAKBANK) Upcoming Dividend Will Be Larger Than Last Year's

The National Bank of Ras Al-Khaimah (P.S.C.) (ADX:RAKBANK) has announced that it will be increasing its dividend on the 1st of January to د.إ0.23. This takes the dividend yield from 4.3% to 4.3%, which shareholders will be pleased with.

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

National Bank of Ras Al-Khaimah (P.S.C.)'s Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, National Bank of Ras Al-Khaimah (P.S.C.)'s earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 13.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, 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. The dividend has gone from د.إ0.25 in 2012 to the most recent annual payment of د.إ0.23. The dividend has shrunk at a rate of less than 1% a year over this period. A company that decreases its dividend over time generally isn't what we are looking for.

National Bank of Ras Al-Khaimah (P.S.C.) May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. 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 could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On National Bank of Ras Al-Khaimah (P.S.C.)'s Dividend

Overall, we always like to see the dividend being raised, but we don't think National Bank of Ras Al-Khaimah (P.S.C.) will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think National Bank of Ras Al-Khaimah (P.S.C.) is a great stock to add to your portfolio if income is your focus.

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. 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. If you are a dividend investor, you might also want to look at our curated list of high yield 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.