Al-Dawaa Medical Services (TADAWUL:4163) Has Announced A Dividend Of SAR1.25

The board of Al-Dawaa Medical Services Company (TADAWUL:4163) has announced that it will pay a dividend on the 28th of September, with investors receiving SAR1.25 per share. This payment means the dividend yield will be 2.6%, which is below the average for the industry.

Check out our latest analysis for Al-Dawaa Medical Services

Al-Dawaa Medical Services' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Al-Dawaa Medical Services' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 56.3%. If the dividend continues on this path, the payout ratio could be by next year, which we think can be pretty sustainable going forward.

Al-Dawaa Medical Services Is Still Building Its Track Record

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. Al-Dawaa Medical Services' earnings per share has shrunk at 85% a year over the past three 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. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Al-Dawaa Medical Services' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Al-Dawaa Medical Services that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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