Al-Jouf Agricultural Development (TADAWUL:6070) Has Affirmed Its Dividend Of SAR0.50

Al-Jouf Agricultural Development Co. (TADAWUL:6070) has announced that it will pay a dividend of SAR0.50 per share on the 1st of January. This payment means that the dividend yield will be 1.8%, which is around the industry average.

View our latest analysis for Al-Jouf Agricultural Development

Al-Jouf Agricultural Development's Payment Could Potentially Have Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. Al-Jouf Agricultural Development is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share could rise by 46.5% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The last annual payment of SAR1.00 was flat on the annual payment from10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Al-Jouf Agricultural Development has been growing its earnings per share at 47% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Al-Jouf Agricultural Development's payments, as there could be some issues with sustaining them into the future. While Al-Jouf Agricultural Development is earning enough to cover the payments, the cash flows are lacking. We don't think Al-Jouf Agricultural Development is a great stock to add to your portfolio if income is your focus.

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 1 warning sign for Al-Jouf Agricultural Development 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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