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

Saudi Awwal Bank (TADAWUL:1060) has announced that it will pay a dividend of SAR1.00 per share on the 4th of September. This makes the dividend yield 6.3%, which will augment investor returns quite nicely.

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Saudi Awwal Bank's Payment Expected To Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much.

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 26% is a good sign as this means that earnings decently cover dividends.

Looking forward, EPS is forecast to rise by 22.3% over the next 3 years. Analysts forecast the future payout ratio could be 53% over the same time horizon, which is a number we think the company can maintain.

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 dividend has gone from SAR0.70 total annually to SAR2.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Saudi Awwal Bank has grown earnings per share at 46% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Saudi Awwal Bank's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Saudi Awwal Bank that investors need to be conscious of moving forward. Is Saudi Awwal Bank 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.