Ras Al Khaimah for White Cement & Construction Materials P.S.C (ADX:RAKWCT) Has Announced That It Will Be Increasing Its Dividend To د.إ0.10

The board of Ras Al Khaimah Co. for White Cement & Construction Materials P.S.C. (ADX:RAKWCT) has announced that it will be increasing its dividend by 100% on the 11th of May to د.إ0.10. This takes the dividend yield from 3.0% to 6.0%, which shareholders will be pleased with.

View our latest analysis for Ras Al Khaimah for White Cement & Construction Materials P.S.C

Ras Al Khaimah for White Cement & Construction Materials P.S.C Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before this announcement, Ras Al Khaimah for White Cement & Construction Materials P.S.C was paying out 71% of earnings, but a comparatively small 37% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 4.9% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 153%, which could put the dividend under pressure if earnings don't start to improve.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from د.إ0.11 to د.إ0.05. The dividend has shrunk at around 7.7% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Over the past five years, it looks as though Ras Al Khaimah for White Cement & Construction Materials P.S.C's EPS has declined at around 4.9% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Ras Al Khaimah for White Cement & Construction Materials P.S.C's Dividend

Overall, we always like to see the dividend being raised, but we don't think Ras Al Khaimah for White Cement & Construction Materials P.S.C will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Ras Al Khaimah for White Cement & Construction Materials P.S.C that investors need to be conscious of moving forward. Is Ras Al Khaimah for White Cement & Construction Materials 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.