SABIC Agri-Nutrients (TADAWUL:2020) Is Paying Out A Larger Dividend Than Last Year

SABIC Agri-Nutrients Company (TADAWUL:2020) will increase its dividend on the 24th of April to ر.س3.00. Despite this raise, the dividend yield of 2.4% is only a modest boost to shareholder returns.

View our latest analysis for SABIC Agri-Nutrients

SABIC Agri-Nutrients' Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, SABIC Agri-Nutrients' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 20.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from ر.س7.20 in 2012 to the most recent annual payment of ر.س6.00. This works out to be a decline of approximately 1.8% per year over that time. 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. SABIC Agri-Nutrients has seen EPS rising for the last five years, at 35% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like SABIC Agri-Nutrients' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for SABIC Agri-Nutrients (of which 1 is potentially serious!) you should know about. Is SABIC Agri-Nutrients not quite the opportunity you were looking for? Why not check out our selection of top 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.