Saudi Arabian Oil Company's (TADAWUL:2222) investors are due to receive a payment of ر.س0.35 per share on 1st of September. This payment means that the dividend yield will be 4.0%, which is around the industry average.
Check out our latest analysis for Saudi Arabian Oil
Saudi Arabian Oil's Dividend Is Well Covered By Earnings
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
The next year is set to see EPS grow by 44.1%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 73% which would be quite comfortable going to take the dividend forward.
Saudi Arabian Oil Doesn't Have A Long Payment History
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 May Be Hard To Achieve
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. However, Saudi Arabian Oil's EPS was effectively flat over the past three years, which could stop the company from paying more every year.
Saudi Arabian Oil's Dividend Doesn't Look Great
Overall, while some might be pleased that the dividend wasn't cut, we think this may help Saudi Arabian Oil make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. We don't think that this is a great candidate to be an 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 instance, we've picked out 2 warning signs for Saudi Arabian Oil that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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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.
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About SASE:2222
Saudi Arabian Oil
Operates as an integrated energy and chemical company in the Kingdom of Saudi Arabia and internationally.
Excellent balance sheet with acceptable track record.
