CATRION Catering Holding's (TADAWUL:6004) Dividend Will Be Increased To SAR1.10

CATRION Catering Holding Company (TADAWUL:6004) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of April to SAR1.10. The payment will take the dividend yield to 1.5%, which is in line with the average for the industry.

Check out our latest analysis for CATRION Catering Holding

CATRION Catering Holding's Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, CATRION Catering Holding's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 47.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from SAR5.00 total annually to SAR2.00. This works out to be a decline of approximately 8.8% per year 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 Is Doubtful

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. In the last five years, CATRION Catering Holding's earnings per share has shrunk at approximately 7.8% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think CATRION Catering Holding's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for CATRION Catering Holding that investors should know about before committing capital to this stock. Is CATRION Catering Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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