Saudi Arabian Oil's (TADAWUL:2222) Dividend Will Be SAR0.3312

Saudi Arabian Oil Company (TADAWUL:2222) has announced that it will pay a dividend of SAR0.3312 per share on the 29th of May. The dividend yield will be in the average range for the industry at 7.0%.

We've discovered 1 warning sign about Saudi Arabian Oil. View them for free.

Saudi Arabian Oil's Future Dividends May Potentially Be At Risk

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, the company was paying out 102% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

The next 12 months is set to see EPS grow by 6.1%. If the dividend continues on its recent course, the payout ratio in 12 months could be 116%, which is a bit high and could start applying pressure to the balance sheet.

View our latest analysis for Saudi Arabian Oil

Saudi Arabian Oil Is Still Building Its Track Record

Saudi Arabian Oil's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The annual payment during the last 5 years was SAR0.917 in 2020, and the most recent fiscal year payment was SAR1.82. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Saudi Arabian Oil May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 4.4% per annum over the last five years, which admittedly is a bit slow. The earnings growth is anaemic, and the company is paying out 102% of its profit. This gives limited room for the company to raise the dividend in the future.

The Dividend Could Prove To Be Unreliable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think Saudi Arabian Oil 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 Saudi Arabian Oil that you should be aware of before investing. Is Saudi Arabian Oil not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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