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 increasing its dividend by 17% on the 10th of June to SAR1.17, up from last year's comparable payment of SAR1.00. Based on this payment, the dividend yield for the company will be 1.5%, which is fairly typical for the industry.

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 like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Dr. Sulaiman Al Habib Medical Services Group's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Over the next year, EPS is forecast to expand by 62.8%. 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

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of SAR2.00 in 2020 to the most recent total annual payment of SAR4.32. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Dr. Sulaiman Al Habib Medical Services Group has grown earnings per share at 21% per year over the past five years. Dr. Sulaiman Al Habib Medical Services Group is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

In Summary

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. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Dr. Sulaiman Al Habib Medical Services Group (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.

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.