Banque Saudi Fransi (TADAWUL:1050) Is Increasing Its Dividend To SAR1.00

Banque Saudi Fransi (TADAWUL:1050) has announced that it will be increasing its periodic dividend on the 11th of June to SAR1.00, which will be 11% higher than last year's comparable payment amount of SAR0.90. This will take the annual payment to 5.1% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Banque Saudi Fransi

Banque Saudi Fransi's Earnings Will Easily Cover The Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained.

Having distributed dividends for at least 10 years, Banque Saudi Fransi has a long history of paying out a part of its earnings to shareholders. Taking data from its last earnings report, calculating for the company's payout ratio shows 59%, which means that Banque Saudi Fransi would be able to pay its last dividend without pressure on the balance sheet.

The next 3 years are set to see EPS grow by 29.3%. The future payout ratio could be 54% 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. Since 2014, the dividend has gone from SAR0.60 total annually to SAR1.85. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. Banque Saudi Fransi has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Banque Saudi Fransi has been growing its earnings per share at 23% a year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Banque Saudi Fransi could prove to be a strong dividend payer.

We Really Like Banque Saudi Fransi's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. As an example, we've identified 1 warning sign for Banque Saudi Fransi that you should be aware of before investing. Is Banque Saudi Fransi 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.