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

The board of The National Bank of Ras Al-Khaimah (P.S.C.) (ADX:RAKBANK) has announced that it will be increasing its dividend by 61% on the 1st of January to AED0.50, up from last year's comparable payment of AED0.31. This makes the dividend yield about the same as the industry average at 4.8%.

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

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

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible.

National Bank of Ras Al-Khaimah (P.S.C.) has a long history of paying out dividends, with its current track record at a minimum of 10 years. Past distributions do not necessarily guarantee future ones, but National Bank of Ras Al-Khaimah (P.S.C.)'s payout ratio of 29% is a good sign as this means that earnings decently cover dividends.

EPS is set to fall by 8.9% over the next 3 years. Fortunately, analysts forecast the future payout ratio to be 48% over the same time horizon, 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 annual payment during the last 10 years was AED0.417 in 2015, and the most recent fiscal year payment was AED0.31. Doing the maths, this is a decline of about 2.9% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. National Bank of Ras Al-Khaimah (P.S.C.) has impressed us by growing EPS at 14% per year over the past five years. National Bank of Ras Al-Khaimah (P.S.C.) definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like National Bank of Ras Al-Khaimah (P.S.C.)'s Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The earnings easily cover the company's distributions, and the company is generating plenty of cash. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for National Bank of Ras Al-Khaimah (P.S.C.) (1 shouldn't be ignored!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.