Alamar Foods' (TADAWUL:6014) Shareholders Will Receive A Smaller Dividend Than Last Year

Alamar Foods Company's (TADAWUL:6014) dividend is being reduced from last year's payment covering the same period to SAR0.40 on the 22nd of April. This means the annual payment is 2.6% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Alamar Foods

Alamar Foods' Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Alamar Foods' dividend made up quite a large proportion of earnings but only 37% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 88.8%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 35% which brings it into quite a comfortable range.

Alamar Foods' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2022, the dividend has gone from SAR3.38 total annually to SAR2.40. The dividend has fallen 29% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Alamar Foods Might Find It Hard To Grow Its Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Alamar Foods has impressed us by growing EPS at 13% per year over the past three years. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Alamar Foods' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Alamar Foods 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Alamar Foods that you should be aware of before investing. Is Alamar Foods 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.