Bank of Queensland's (ASX:BOQ) Shareholders Will Receive A Smaller Dividend Than Last Year

Bank of Queensland Limited's (ASX:BOQ) dividend is being reduced from last year's payment covering the same period to A$0.21 on the 16th of November. The dividend yield of 7.5% is still a nice boost to shareholder returns, despite the cut.

See our latest analysis for Bank of Queensland

Bank of Queensland's Dividend Forecasted To Be Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much.

Bank of Queensland has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Despite this history however, the company's latest earnings report actually shows that it didn't have enough earnings to cover its dividends. This is very worrying for shareholders, as this shows that Bank of Queensland will not be able to sustain its dividend at its current rate.

EPS is forecast to rise by 4.9% over the next 3 years. Analysts estimate the future payout ratio could reach 79% over that same time period, which is on the higher side, but certainly still feasible.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of A$0.52 in 2013 to the most recent total annual payment of A$0.41. This works out to be a decline of approximately 2.3% 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.

Bank of Queensland May Find It Hard To Grow The Dividend

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. Bank of Queensland has seen earnings per share falling at 4.2% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments are bit high to be considered sustainable, and the track record isn't the best. We would probably look elsewhere for an income investment.

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 1 warning sign for Bank of Queensland that investors should know about before committing capital to this stock. 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.