Dr. Sulaiman Al Habib Medical Services Group (TADAWUL:4013) Is Paying Out A Larger Dividend Than Last Year

Dr. Sulaiman Al Habib Medical Services Group Company's (TADAWUL:4013) dividend will be increasing from last year's payment of the same period to SAR1.20 on 25th of November. This makes the dividend yield about the same as the industry average at 1.5%.

Check out our latest analysis for Dr. Sulaiman Al Habib Medical Services Group

Dr. Sulaiman Al Habib Medical Services Group's Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Dr. Sulaiman Al Habib Medical Services Group is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 52.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 59%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dr. Sulaiman Al Habib Medical Services Group's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The dividend has gone from an annual total of SAR2.00 in 2020 to the most recent total annual payment of SAR4.32. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Dr. Sulaiman Al Habib Medical Services Group has seen EPS rising for the last five years, at 22% per annum. 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.

Our Thoughts On Dr. Sulaiman Al Habib Medical Services Group's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Dr. Sulaiman Al Habib Medical Services Group's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

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. To that end, Dr. Sulaiman Al Habib Medical Services Group has 2 warning signs (and 1 which is potentially serious) we think you should know about. Is Dr. Sulaiman Al Habib Medical Services Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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