Alandalus Property (TADAWUL:4320) Is Paying Out A Dividend Of SAR0.25

Alandalus Property Company's (TADAWUL:4320) investors are due to receive a payment of SAR0.25 per share on 26th of March. This means the annual payment will be 2.0% of the current stock price, which is lower than the industry average.

See our latest analysis for Alandalus Property

Alandalus Property's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, the company was paying out 100% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 35%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

EPS is set to fall by 5.0% over the next 12 months if recent trends continue. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 82%, meaning that most of the company's earnings is being paid out to shareholders.

Alandalus Property's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The annual payment during the last 6 years was SAR1.50 in 2018, and the most recent fiscal year payment was SAR0.50. Dividend payments have fallen sharply, down 67% 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 Come By

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. Over the past five years, it looks as though Alandalus Property's EPS has declined at around 5.0% a year. 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.

Alandalus Property's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Alandalus Property (of which 1 is a bit concerning!) 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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