Qassim Cement's (TADAWUL:3040) Dividend Will Be SAR0.65

The board of Qassim Cement Company (TADAWUL:3040) has announced that it will pay a dividend of SAR0.65 per share on the 17th of December. This makes the dividend yield about the same as the industry average at 3.5%.

Check out our latest analysis for Qassim Cement

Qassim Cement Is Paying Out More Than It Is Earning

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Qassim Cement's dividend was only 35% of earnings, however it was paying out 1,279% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Earnings per share is forecast to rise by 32.8% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 100% over the next year.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was SAR6.00 in 2013, and the most recent fiscal year payment was SAR2.20. This works out to be a decline of approximately 9.5% 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.

Dividend Growth May Be Hard To Achieve

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. Qassim Cement hasn't seen much change in its earnings per share over the last five years. If Qassim Cement is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Qassim Cement's Dividend

Overall, we always like to see the dividend being raised, but we don't think Qassim Cement will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Qassim Cement that you should be aware of before investing. Is Qassim Cement not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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