Dr. Sulaiman Al Habib Medical Services Group's (TADAWUL:4013) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Dr. Sulaiman Al Habib Medical Services Group Company (TADAWUL:4013) has announced that it will be paying its dividend of SAR1.00 on the 29th of May, an increased payment from last year's comparable dividend. This makes the dividend yield about the same as the industry average at 1.4%.

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

Dr. Sulaiman Al Habib Medical Services Group's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. At the time of the last dividend payment, Dr. Sulaiman Al Habib Medical Services Group was paying out a very large proportion of what it was earning and 105% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

The next year is set to see EPS grow by 54.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 50%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dr. Sulaiman Al Habib Medical Services Group Is Still Building Its Track Record

The dividend has been pretty stable looking back, but the company hasn't been paying one for very long. This makes it tough to judge how it would fare through a full economic cycle. Since 2020, the annual payment back then was SAR2.00, compared to the most recent full-year payment of SAR4.00. This means that it has been growing its distributions at 26% per annum over that time. Dr. Sulaiman Al Habib Medical Services Group has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Dr. Sulaiman Al Habib Medical Services Group has grown earnings per share at 20% per year over the past five years. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

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

Overall, we always like to see the dividend being raised, but we don't think Dr. Sulaiman Al Habib Medical Services Group will make a great income stock. While Dr. Sulaiman Al Habib Medical Services Group is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 7 Dr. Sulaiman Al Habib Medical Services Group analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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