Advanced Petrochemical (TADAWUL:2330) Will Pay A Dividend Of SAR0.55

Advanced Petrochemical Company (TADAWUL:2330) has announced that it will pay a dividend of SAR0.55 per share on the 28th of May. This means the dividend yield will be fairly typical at 5.0%.

View our latest analysis for Advanced Petrochemical

Advanced Petrochemical's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before this announcement, Advanced Petrochemical was paying out 123% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

The next year is set to see EPS grow by 37.3%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 69% which would be quite comfortable going to take the dividend forward.

Advanced Petrochemical Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. The dividend has gone from an annual total of SAR1.58 in 2014 to the most recent total annual payment of SAR2.20. This implies that the company grew its distributions at a yearly rate of about 3.8% over that duration. We like that the dividend hasn't been shrinking. However we're conscious that the company hasn't got an overly long track record of dividend payments yet, which makes us wary of relying on its dividend income.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though Advanced Petrochemical's EPS has declined at around 8.9% a year. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

We're Not Big Fans Of Advanced Petrochemical's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Advanced Petrochemical make more consistent payments in the future. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, this doesn't get us very excited from an income standpoint.

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. Case in point: We've spotted 4 warning signs for Advanced Petrochemical (of which 2 are a bit unpleasant!) you should know about. 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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