Al Yah Satellite Communication Company PJSC's (ADX:YAHSAT) Dividend Will Be Increased To $0.0823

Al Yah Satellite Communication Company PJSC (ADX:YAHSAT) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of October to $0.0823. This will take the dividend yield to an attractive 6.0%, providing a nice boost to shareholder returns.

Check out our latest analysis for Al Yah Satellite Communication Company PJSC

Al Yah Satellite Communication Company PJSC Is Paying Out More Than It Is Earning

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 81% of earnings, but cash flows were much higher. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 114.3%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 143%, which probably can't continue without putting some pressure on the balance sheet.

Al Yah Satellite Communication Company PJSC Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Al Yah Satellite Communication Company PJSC's EPS has fallen by approximately 84% per year during the past three years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Al Yah Satellite Communication Company PJSC that you should be aware of before investing. Is Al Yah Satellite Communication Company PJSC not quite the opportunity you were looking for? Why not check out our selection of top 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.