Bank of Queensland's (ASX:BOQ) Dividend Will Be Increased To A$0.20

The board of Bank of Queensland Limited (ASX:BOQ) has announced that it will be paying its dividend of A$0.20 on the 21st of November, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 5.6%, which is in line with the average for the industry.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Bank of Queensland's Payment Expected To Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Bank of Queensland has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. But while this history shows that the company was able to sustain its dividend for a decent period of time, its most recent earnings report shows that the company did not make enough earnings to cover its dividend payout. This is an alarming sign for the sustainability of its dividends, as it may mean that Bank of Queenslandis pulling cash from elsewhere to keep its shareholders happy.

Over the next 3 years, EPS is forecast to expand by 193.9%. Despite the current payout ratio being slightly elevated, analysts estimate the future payout ratio will be 71% over the same time period, which would make us comfortable with the sustainability of the dividend.

Check out our latest analysis for Bank of Queensland

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from A$0.72 total annually to A$0.40. This works out to be a decline of approximately 5.7% per year over that time. 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

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though Bank of Queensland's EPS has declined at around 4.4% 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. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Bank of Queensland's Dividend Doesn't Look Sustainable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments are bit high to be considered sustainable, and the track record isn't the best. 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. For example, we've picked out 3 warning signs for Bank of Queensland that investors should know about before committing capital to this stock. Is Bank of Queensland not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.