Saudi Awwal Bank's (TADAWUL:1060) Dividend Will Be SAR1.00

The board of Saudi Awwal Bank (TADAWUL:1060) has announced that it will pay a dividend on the 19th of May, with investors receiving SAR1.00 per share. This will take the dividend yield to an attractive 5.3%, providing a nice boost to shareholder returns.

Saudi Awwal Bank's Earnings Will Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Saudi Awwal Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. Past distributions do not necessarily guarantee future ones, but Saudi Awwal Bank's payout ratio of 53% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 24.9% over the next 3 years. Analysts estimate the future payout ratio will be 52% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Saudi Awwal Bank

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was SAR0.70, compared to the most recent full-year payment of SAR2.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Saudi Awwal Bank has grown earnings per share at 20% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Saudi Awwal Bank Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Saudi Awwal Bank is a strong income stock thanks to its track record and growing earnings. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Saudi Awwal Bank that investors should know about before committing capital to this stock. 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.