Why Qatar Islamic Bank (Q.P.S.C.) (DSM:QIBK) Is A Dividend Rockstar

Today we'll take a closer look at Qatar Islamic Bank (Q.P.S.C.) (DSM:QIBK) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.

A high yield and a long history of paying dividends is an appealing combination for Qatar Islamic Bank (Q.P.S.C.). We'd guess that plenty of investors have purchased it for the income. Some simple research can reduce the risk of buying Qatar Islamic Bank (Q.P.S.C.) for its dividend - read on to learn more.

Explore this interactive chart for our latest analysis on Qatar Islamic Bank (Q.P.S.C.)!

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Qatar Islamic Bank (Q.P.S.C.) paid out 44% of its profit as dividends, over the trailing twelve month period. This is a middling range that strikes a nice balance between paying dividends to shareholders, and retaining enough earnings to invest in future growth. Besides, if reinvestment opportunities dry up, the company has room to increase the dividend.

Remember, you can always get a snapshot of Qatar Islamic Bank (Q.P.S.C.)'s latest financial position, by checking our visualisation of its financial health.

Dividend Volatility

One of the major risks of relying on dividend income, is the potential for a company to struggle financially and cut its dividend. Not only is your income cut, but the value of your investment declines as well - nasty. For the purpose of this article, we only scrutinise the last decade of Qatar Islamic Bank (Q.P.S.C.)'s dividend payments. The dividend has been stable over the past 10 years, which is great. We think this could suggest some resilience to the business and its dividends. During the past 10-year period, the first annual payment was ر.ق0.5 in 2011, compared to ر.ق0.5 last year. Dividend payments have grown at less than 1% a year over this period.

While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is unappealing.

Dividend Growth Potential

Dividend payments have been consistent over the past few years, but we should always check if earnings per share (EPS) are growing, as this will help maintain the purchasing power of the dividend. Qatar Islamic Bank (Q.P.S.C.) has grown its earnings per share at 9.2% per annum over the past five years. Earnings per share have been growing at a credible rate. What's more, the payout ratio is reasonable and provides some protection to the dividend, or even the potential to increase it.

Conclusion

When we look at a dividend stock, we need to form a judgement on whether the dividend will grow, if the company is able to maintain it in a wide range of economic circumstances, and if the dividend payout is sustainable. Firstly, we like that Qatar Islamic Bank (Q.P.S.C.) has a low and conservative payout ratio. Next, growing earnings per share and steady dividend payments is a great combination. Overall, we think there are a lot of positives to Qatar Islamic Bank (Q.P.S.C.) from a dividend perspective.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 4 analysts we track are forecasting for Qatar Islamic Bank (Q.P.S.C.) for free with public analyst estimates for the company.

We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 3%.

If you’re looking to trade Qatar Islamic Bank (Q.P.S.C.), open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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