Qatar National Bank (Q.P.S.C.)'s (DSM:QNBK) Shareholders Will Receive A Bigger Dividend Than Last Year

Qatar National Bank (Q.P.S.C.) (DSM:QNBK) has announced that it will be increasing its dividend on the 1st of January to ر.ق0.55. The announced payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

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

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

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Qatar National Bank (Q.P.S.C.)'s earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Looking forward, earnings per share is forecast to rise by 16.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 38%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the dividend has gone from ر.ق0.28 to 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Qatar National Bank (Q.P.S.C.)'s earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.2% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

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

In summary, while it's always good to see the dividend being raised, we don't think Qatar National Bank (Q.P.S.C.)'s payments are rock solid. While Qatar National Bank (Q.P.S.C.) is earning enough to cover the payments, the cash flows are lacking. We don't think Qatar National Bank (Q.P.S.C.) is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Qatar National Bank (Q.P.S.C.) you should be aware of, and 1 of them is a bit unpleasant. 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.