Eastern Province Cement (TADAWUL:3080) Is Paying Out Less In Dividends Than Last Year

Eastern Province Cement Company (TADAWUL:3080) is reducing its dividend to ر.س1.10 on the 26th of April. This means that the annual payment will be 5.0% of the current stock price, which is in line with the average for the industry.

Check out our latest analysis for Eastern Province Cement

Eastern Province Cement Doesn't Earn Enough To Cover Its Payments

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.

Earnings per share is forecast to rise by 8.9% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 101%, which probably can't continue putting some pressure on the balance sheet.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the first annual payment was ر.س3.50, compared to the most recent full-year payment of ر.س2.20. This works out to be a decline of approximately 4.5% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Eastern Province Cement May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's not great to see that Eastern Province Cement's earnings per share has fallen at approximately 2.4% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. 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.

Eastern Province Cement's Dividend Doesn't Look Great

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Eastern Province Cement that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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