Mesaieed Petrochemical Holding Company Q.P.S.C (DSM:MPHC) Will Pay A Dividend Of QAR0.026

The board of Mesaieed Petrochemical Holding Company Q.P.S.C. (DSM:MPHC) has announced that it will pay a dividend on the 1st of January, with investors receiving QAR0.026 per share. This makes the dividend yield 6.2%, which will augment investor returns quite nicely.

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Mesaieed Petrochemical Holding Company Q.P.S.C's Future Dividends May Potentially Be At Risk

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the dividend made up 149% of earnings, and the company was generating negative free cash flows. This high of a dividend payment could start to put pressure on the balance sheet in the future.

If the company can't turn things around, EPS could fall by 18.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 125%, which could put the dividend in jeopardy if the company's earnings don't improve.

View our latest analysis for Mesaieed Petrochemical Holding Company Q.P.S.C

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of QAR0.11 in 2015 to the most recent total annual payment of QAR0.084. The dividend has shrunk at around 2.7% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been sinking by 18% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Mesaieed Petrochemical Holding Company Q.P.S.C's Dividend Doesn't Look Great

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. We don't think that this is a great candidate to be an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Mesaieed Petrochemical Holding Company Q.P.S.C that investors should take into consideration. 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.