Al Hammadi Holding (TADAWUL:4007) Has Affirmed Its Dividend Of SAR0.35

The board of Al Hammadi Holding Company (TADAWUL:4007) has announced that it will pay a dividend of SAR0.35 per share on the 1st of December. This means the annual payment is 3.5% of the current stock price, which is above the average for the industry.

View our latest analysis for Al Hammadi Holding

Al Hammadi Holding's Payment Could Potentially Have Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Al Hammadi Holding's earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 15.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 65% 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. Since 2014, the dividend has gone from SAR0.469 total annually to SAR1.40. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Al Hammadi Holding has impressed us by growing EPS at 31% per year over the past five years. Al Hammadi Holding is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Al Hammadi Holding Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Al Hammadi Holding that investors need to be conscious of moving forward. Is Al Hammadi Holding not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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