Alinma Bank (TADAWUL:1150) Is Increasing Its Dividend To SAR0.50

Alinma Bank's (TADAWUL:1150) dividend will be increasing from last year's payment of the same period to SAR0.50 on 11th of May. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

Check out our latest analysis for Alinma Bank

Alinma Bank's Earnings Will Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having paid out dividends for 8 years, Alinma Bank has a good 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 of 55%shows that Alinma Bank would be able to pay its last dividend without pressure on the balance sheet.

Over the next 3 years, EPS is forecast to expand by 66.0%. Analysts forecast the future payout ratio could be 52% over the same time horizon, which is a number we think the company can maintain.

Alinma Bank's Dividend Has Lacked Consistency

It's comforting to see that Alinma Bank has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of SAR0.375 in 2015 to the most recent total annual payment of SAR1.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Alinma Bank has seen EPS rising for the last five years, at 11% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Alinma Bank's Dividend

Overall, a dividend increase is always good, and we think that Alinma Bank is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Alinma Bank you should be aware of, and 1 of them is significant. Is Alinma 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.