Aamal Company Q.P.S.C's (DSM:AHCS) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Aamal Company Q.P.S.C. (DSM:AHCS) has announced that it will be increasing its dividend on the 1st of January to ر.ق0.05. This makes the dividend yield 3.9%, which is above the industry average.

View our latest analysis for Aamal Company Q.P.S.C

Aamal Company Q.P.S.C's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Looking forward, earnings per share is forecast to rise by 24.0% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 72% which would be quite comfortable going to take the dividend forward.

Aamal Company Q.P.S.C's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2015, the dividend has gone from ر.ق0.095 to ر.ق0.05. The dividend has shrunk at around 8.8% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Is Doubtful

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though Aamal Company Q.P.S.C's EPS has declined at around 8.0% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Aamal Company Q.P.S.C's Dividend Doesn't Look Great

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. The dividend doesn't inspire confidence that it will provide solid income in the future.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Aamal Company Q.P.S.C that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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