Sahara International Petrochemical's (TADAWUL:2310) Dividend Will Be SAR0.50

Sahara International Petrochemical Company (TADAWUL:2310) will pay a dividend of SAR0.50 on the 17th of July. This means the dividend yield will be fairly typical at 5.0%.

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Sahara International Petrochemical's Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, the company's dividend was higher than its profits, and made up 89% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Looking forward, earnings per share is forecast to rise by 158.2% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 71% which brings it into quite a comfortable range.

View our latest analysis for Sahara International Petrochemical

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was SAR1.25 in 2015, and the most recent fiscal year payment was SAR1.00. The dividend has shrunk at around 2.2% 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 Could Be Constrained

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. Sahara International Petrochemical has impressed us by growing EPS at 25% per year over the past five years. Although earnings per share is up nicely Sahara International Petrochemical is paying out 165% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Sahara International Petrochemical's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Sahara International Petrochemical's payments, as there could be some issues with sustaining them into the future. In general, the distributions are a little bit higher than we would like, but we can't ignore the fact the quickly growing earnings gives this stock great potential in the future. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Sahara International Petrochemical that investors need to be conscious of moving forward. 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.