Saudi Chemical Holding (TADAWUL:2230) Has Affirmed Its Dividend Of SAR0.50

Saudi Chemical Holding Company (TADAWUL:2230) has announced that it will pay a dividend of SAR0.50 per share on the 29th of January. Based on this payment, the dividend yield will be 1.9%, which is fairly typical for the industry.

Check out our latest analysis for Saudi Chemical Holding

Saudi Chemical Holding's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, Saudi Chemical Holding's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, could fall by 17.0% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 81% in the next 12 months which is on the higher end of the range we would say is sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the dividend has gone from SAR2.63 total annually to SAR0.50. Dividend payments have fallen sharply, down 81% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Earnings per share has been sinking by 17% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Our Thoughts On Saudi Chemical Holding's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Saudi Chemical Holding's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Taking the debate a bit further, we've identified 2 warning signs for Saudi Chemical Holding that investors need to be conscious of moving forward. Is Saudi Chemical Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.