Maharah for Human Resources (TADAWUL:1831) Is Paying Out Less In Dividends Than Last Year

Maharah for Human Resources Company's (TADAWUL:1831) dividend is being reduced by 29% to SAR1.25 per share on 14th of September, in comparison to last year's comparable payment of SAR1.75. The yield is still above the industry average at 5.8%.

See our latest analysis for Maharah for Human Resources

Maharah for Human Resources Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Maharah for Human Resources' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, EPS could fall by 18.7% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 150%, which could put the dividend under pressure if earnings don't start to improve.

Maharah for Human Resources' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of SAR5.34 in 2019 to the most recent total annual payment of SAR3.75. This works out to a decline of approximately 30% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Maharah for Human Resources' earnings per share has shrunk at 19% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

Maharah for Human Resources' Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Maharah for Human Resources is a great stock to add to your portfolio if income is your focus.

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. For example, we've identified 3 warning signs for Maharah for Human Resources (2 are a bit unpleasant!) that you should be aware of before investing. Is Maharah for Human Resources 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.