Stock Analysis

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

DSM:ORDS
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The board of Ooredoo Q.P.S.C. (DSM:ORDS) has announced that the dividend on 1st of January will be increased to ر.ق0.30, which will be 20% higher than last year. Based on the announced payment, the dividend yield for the company will be 4.0%, which is fairly typical for the industry.

View our latest analysis for Ooredoo Q.P.S.C

Ooredoo Q.P.S.C's Earnings Easily Cover the Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, the company was paying out 1,707% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 40%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Earnings per share is forecast to rise exponentially over the next year. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 75%, which is on the higher side, but certainly feasible.

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DSM:ORDS Historic Dividend February 18th 2022

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was ر.ق0.32 in 2012, and the most recent fiscal year payment was ر.ق0.25. The dividend has shrunk at around 2.5% 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 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. Earnings per share has been sinking by 54% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Ooredoo Q.P.S.C's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Ooredoo 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Ooredoo Q.P.S.C has 3 warning signs (and 1 which is a bit concerning) we think you should know about. 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.