Kingdom Holding (TADAWUL:4280) Is Due To Pay A Dividend Of SAR0.07

The board of Kingdom Holding Company (TADAWUL:4280) has announced that it will pay a dividend on the 1st of January, with investors receiving SAR0.07 per share. The dividend yield will be 3.0% based on this payment which is still above the industry average.

View our latest analysis for Kingdom Holding

Kingdom Holding's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Over the next year, EPS is forecast to expand by 16.9%. If recent patterns in the dividend continues, the payout ratio in 12 months could be 84% which is a bit high but can definitely be sustainable.

Kingdom Holding's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The dividend has gone from an annual total of SAR0.50 in 2020 to the most recent total annual payment of SAR0.28. Dividend payments have fallen sharply, down 44% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

There Isn't Much Room To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Kingdom Holding has seen EPS rising for the last five years, at 8.1% per annum. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Kingdom Holding's payments, as there could be some issues with sustaining them into the future. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. 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. 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 Kingdom Holding (1 is significant!) 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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