Qatar National Cement Company (Q.P.S.C.) (DSM:QNCD) Will Pay A Larger Dividend Than Last Year At ر.ق0.30

The board of Qatar National Cement Company (Q.P.S.C.) (DSM:QNCD) has announced that it will be increasing its dividend by 50% on the 1st of January to ر.ق0.30. This will take the annual payment from 3.1% to 4.6% of the stock price, which is above what most companies in the industry pay.

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

Qatar National Cement Company (Q.P.S.C.) Doesn't Earn Enough To Cover Its Payments

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Qatar National Cement Company (Q.P.S.C.)'s earnings. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 13.9% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 98%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from ر.ق0.41 in 2012 to the most recent annual payment of ر.ق0.20. The dividend has shrunk at around 6.9% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Qatar National Cement Company (Q.P.S.C.)'s EPS has fallen by approximately 14% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Qatar National Cement Company (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 Cement Company (Q.P.S.C.)'s payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

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. Case in point: We've spotted 2 warning signs for Qatar National Cement Company (Q.P.S.C.) (of which 1 makes us a bit uncomfortable!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.