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 (TADAWUL:4013) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of March to SAR1.23. Based on this payment, the dividend yield for the company will be 1.5%, which is fairly typical for the industry.

View 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

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Over the next year, EPS is forecast to expand by 57.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 59% by next year, which is in a pretty sustainable range.

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

Dr. Sulaiman Al Habib Medical Services Group has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. 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 17% 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Dr. Sulaiman Al Habib Medical Services Group has seen EPS rising for the last five years, at 22% per annum. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Dr. Sulaiman Al Habib Medical Services Group is not retaining those earnings to reinvest in growth.

In Summary

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. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Dr. Sulaiman Al Habib Medical Services Group has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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