Bank of Queensland's (ASX:BOQ) Shareholders Will Receive A Bigger Dividend Than Last Year

Bank of Queensland Limited (ASX:BOQ) has announced that it will be increasing its periodic dividend on the 23rd of May to A$0.18, which will be 5.9% higher than last year's comparable payment amount of A$0.17. This makes the dividend yield about the same as the industry average at 4.7%.

Our free stock report includes 1 warning sign investors should be aware of before investing in Bank of Queensland. Read for free now.

Bank of Queensland's Payment Expected To Have Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Having distributed dividends for at least 10 years, Bank of Queensland has a long history of paying out a part of its earnings to shareholders. Based on Bank of Queensland's last earnings report, the payout ratio is at a decent 76%, meaning that the company is able to pay out its dividend with a bit of room to spare.

The next 3 years are set to see EPS grow by 29.9%. Despite the current payout ratio being slightly elevated, analysts estimate the future payout ratio will be 70% over the same time period, which would make us comfortable with the sustainability of the dividend.

See our latest analysis for Bank of Queensland

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was A$0.68 in 2015, and the most recent fiscal year payment was A$0.34. Doing the maths, this is a decline of about 6.7% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Bank of Queensland May Find It Hard To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Bank of Queensland has seen earnings per share falling at 3.3% per year over the last five years. 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. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Bank of Queensland will make a great income stock. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Bank of Queensland is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 picked out 1 warning sign for Bank of Queensland that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.