Qatar National Bank (Q.P.S.C.) (DSM:QNBK) Will Pay A Larger Dividend Than Last Year At ر.ق0.55

Qatar National Bank (Q.P.S.C.) (DSM:QNBK) will increase its dividend on the 1st of January to ر.ق0.55. Based on the announced payment, the dividend yield for the company will be 2.5%, which is fairly typical for the industry.

Check out our latest analysis for Qatar National Bank (Q.P.S.C.)

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

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Qatar National Bank (Q.P.S.C.)'s earnings easily covered the dividend, but free cash flows were negative. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to expand by 17.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

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 ر.ق0.28 in 2012 to the most recent annual payment of ر.ق0.55. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Although it's important to note that Qatar National Bank (Q.P.S.C.)'s earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Qatar National Bank (Q.P.S.C.) is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Qatar National Bank (Q.P.S.C.) has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. We have also put together a list of global stocks with a solid dividend.

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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.