Alquiber Quality (BME:ALQ) Is Increasing Its Dividend To €0.243

Alquiber Quality, S.A.'s (BME:ALQ) dividend will be increasing from last year's payment of the same period to €0.243 on 20th of June. This will take the dividend yield to an attractive 2.5%, providing a nice boost to shareholder returns.

We've discovered 5 warning signs about Alquiber Quality. View them for free.

Alquiber Quality's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Alquiber Quality is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 6.8%, which makes us pretty comfortable with the sustainability of the dividend.

Check out our latest analysis for Alquiber Quality

Alquiber Quality's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The annual payment during the last 4 years was €0.12 in 2021, and the most recent fiscal year payment was €0.30. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. Alquiber Quality has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Alquiber Quality has been growing its earnings per share at 18% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Alquiber Quality's prospects of growing its dividend payments in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good 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. Case in point: We've spotted 5 warning signs for Alquiber Quality (of which 2 are potentially serious!) you should know about. 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.