How Does The National Company for Glass Industries (TADAWUL:2150) Fare As A Dividend Stock?

Could The National Company for Glass Industries (TADAWUL:2150) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. Yet sometimes, investors buy a stock for its dividend and lose money because the share price falls by more than they earned in dividend payments.

With a 2.6% yield and a eight-year payment history, investors probably think National Company for Glass Industries looks like a reliable dividend stock. A 2.6% yield is not inspiring, but the longer payment history has some appeal. Some simple analysis can offer a lot of insights when buying a company for its dividend, and we'll go through this below.

Click the interactive chart for our full dividend analysis

Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. As a result, we should always investigate whether a company can afford its dividend, measured as a percentage of a company's net income after tax. Although it reported a loss over the past 12 months, National Company for Glass Industries currently pays a dividend. When a company is loss-making, we next need to check to see if its cash flows can support the dividend.

National Company for Glass Industries paid out 1.5% of its free cash flow as dividends last year, which is conservative and suggests the dividend is sustainable.

We update our data on National Company for Glass Industries every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. The first recorded dividend for National Company for Glass Industries, in the last decade, was eight years ago. Although it has been paying a dividend for several years now, the dividend has been cut at least once, and we're cautious about the consistency of its dividend across a full economic cycle. During the past eight-year period, the first annual payment was ر.س1.3 in 2012, compared to ر.س0.8 last year. This works out to be a decline of approximately 6.2% per year over that time. National Company for Glass Industries' dividend has been cut sharply at least once, so it hasn't fallen by 6.2% every year, but this is a decent approximation of the long term change.

We struggle to make a case for buying National Company for Glass Industries for its dividend, given that payments have shrunk over the past eight years.

Dividend Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though National Company for Glass Industries' EPS have declined at around 42% a year. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and National Company for Glass Industries' earnings per share, which support the dividend, have been anything but stable.

Conclusion

Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. We're a bit uncomfortable with the company paying a dividend while being loss-making, although at least the dividend was covered by free cash flow. Earnings per share have been falling, and the company has cut its dividend at least once in the past. From a dividend perspective, this is a cause for concern. Overall, National Company for Glass Industries falls short in several key areas here. Unless the investor has strong grounds for an alternative conclusion, we find it hard to get interested in a dividend stock with these characteristics.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for National Company for Glass Industries (of which 1 is potentially serious!) you should know about.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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This article by Simply Wall St is general in nature. 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.
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