Bank AlJazira (TADAWUL:1020) Is Increasing Its Dividend To SAR0.40

Bank AlJazira's (TADAWUL:1020) periodic dividend will be increasing on the 15th of August to SAR0.40, with investors receiving 14% more than last year's SAR0.35. This makes the dividend yield about the same as the industry average at 2.9%.

Check out our latest analysis for Bank AlJazira

Bank AlJazira's Payment Expected To Have Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable.

Bank AlJazira has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Bank AlJazira's last earnings report, the payout ratio is at a decent 57%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 69.5%. The future payout ratio could be 32% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of SAR0.289 in 2012 to the most recent total annual payment of SAR0.70. This means that it has been growing its distributions at 9.3% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Bank AlJazira's earnings per share has fallen at approximately 2.1% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Bank AlJazira's payments are rock solid. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Bank AlJazira you should be aware of, and 1 of them is potentially serious. Is Bank AlJazira 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.