Stock Analysis

Yanbu National Petrochemical (TADAWUL:2290) Is Increasing Its Dividend To ر.س1.50

SASE:2290
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Yanbu National Petrochemical Company's (TADAWUL:2290) dividend will be increasing to ر.س1.50 on 13th of July. This will take the annual payment from 3.8% to 3.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Yanbu National Petrochemical

Yanbu National Petrochemical's Earnings Easily Cover the Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, the company's dividend was much higher than its earnings. This situation certainly isn't ideal, and could place significant strain on the balance sheet if it continues.

Earnings per share is forecast to rise by 73.2% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 92% which is a bit high but can definitely be sustainable.

historic-dividend
SASE:2290 Historic Dividend June 26th 2021

Yanbu National Petrochemical's Dividend Has Lacked Consistency

Yanbu National Petrochemical has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The first annual payment during the last 8 years was ر.س2.00 in 2013, and the most recent fiscal year payment was ر.س2.75. This means that it has been growing its distributions at 4.1% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Yanbu National Petrochemical's EPS has declined at around 5.9% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Yanbu National Petrochemical's Dividend Doesn't Look Great

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. The dividend doesn't inspire confidence that it will provide solid income in the future.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Yanbu National Petrochemical that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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