SABIC Agri-Nutrients (TADAWUL:2020) Has Affirmed Its Dividend Of SAR3.00

SABIC Agri-Nutrients Company's (TADAWUL:2020) investors are due to receive a payment of SAR3.00 per share on 17th of February. The dividend yield will be 5.5% based on this payment which is still above the industry average.

View our latest analysis for SABIC Agri-Nutrients

SABIC Agri-Nutrients' Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, SABIC Agri-Nutrients' dividend made up quite a large proportion of earnings but only 67% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 1.1% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 86% which is a bit high but can definitely be sustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was SAR6.40, compared to the most recent full-year payment of SAR6.00. The dividend has shrunk at a rate of less than 1% a year over this period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Could Be Constrained

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. SABIC Agri-Nutrients has impressed us by growing EPS at 12% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for SABIC Agri-Nutrients that you should be aware of before investing. 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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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.