Doha Insurance Group Q.P.S.C (DSM:DOHI) Is Increasing Its Dividend To ر.ق0.12

Doha Insurance Group Q.P.S.C.'s (DSM:DOHI) dividend will be increasing to ر.ق0.12 on 1st of January. This takes the dividend yield from 5.9% to 5.9%, which shareholders will be pleased with.

View our latest analysis for Doha Insurance Group Q.P.S.C

Doha Insurance Group 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. Before this announcement, Doha Insurance Group Q.P.S.C was paying out 82% of earnings, but a comparatively small 61% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Earnings per share could rise by 0.3% over the next year if things go the same way as they have for the last few years. If recent patterns in the dividend continue, the payout ratio in 12 months could be 84% which is a bit high but can definitely be sustainable.

Doha Insurance Group Q.P.S.C's Dividend Has Lacked Consistency

It's comforting to see that Doha Insurance Group Q.P.S.C has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2013, the first annual payment was ر.ق0.091, compared to the most recent full-year payment of ر.ق0.12. This implies that the company grew its distributions at a yearly rate of about 3.1% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

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, Doha Insurance Group 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. Doha Insurance Group Q.P.S.C's earnings per share has barely grown, which is not ideal - perhaps this is why the company pays out the majority of its earnings to shareholders. When a company prefers to pay out cash to its shareholders instead of reinvesting it, this can often say a lot about that company's dividend prospects.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Doha Insurance Group Q.P.S.C will make a great income stock. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 Doha Insurance Group Q.P.S.C (1 is concerning!) 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.