Qatar International Islamic Bank (Q.P.S.C)'s (DSM:QIIK) Upcoming Dividend Will Be Larger Than Last Year's

Qatar International Islamic Bank (Q.P.S.C) (DSM:QIIK) has announced that it will be increasing its dividend on the 1st of January to ر.ق0.38. This makes the dividend yield 3.6%, which is above the industry average.

See our latest analysis for Qatar International Islamic Bank (Q.P.S.C)

Qatar International Islamic Bank (Q.P.S.C)'s Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Qatar International Islamic Bank (Q.P.S.C)'s earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 8.1%. If the dividend continues on this path, the payout ratio could be 58% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The most recent annual payment of ر.ق0.38 is about the same as the first annual payment 10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Qatar International Islamic Bank (Q.P.S.C) May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 2.7% per year. The company has been growing at a pretty soft 2.7% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Qatar International Islamic Bank (Q.P.S.C)'s Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 identified 2 warning signs for Qatar International Islamic Bank (Q.P.S.C) (1 makes us a bit uncomfortable!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.