Jarir Marketing's (TADAWUL:4190) Upcoming Dividend Will Be Larger Than Last Year's

The board of Jarir Marketing Company (TADAWUL:4190) has announced that it will be paying its dividend of SAR0.28 on the 19th of November, an increased payment from last year's comparable dividend. This takes the dividend yield to 5.9%, which shareholders will be pleased with.

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Jarir Marketing's Projections Indicate Future Payments May Be Unsustainable

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Earnings per share is forecast to rise by 13.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 95%, which probably can't continue without putting some pressure on the balance sheet.

View our latest analysis for Jarir Marketing

Jarir Marketing Doesn't Have A Long Payment History

It is great to see that Jarir Marketing has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The annual payment during the last 9 years was SAR0.548 in 2016, and the most recent fiscal year payment was SAR0.83. This implies that the company grew its distributions at a yearly rate of about 4.7% over that duration. It's good to see at least some dividend growth. Yet with a relatively short dividend paying history, we wouldn't want to depend on this dividend too heavily.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Jarir Marketing hasn't seen much change in its earnings per share over the last five years.

We're Not Big Fans Of Jarir Marketing's Dividend

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. The dividend doesn't inspire confidence that it will provide solid income in the future.

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. For example, we've picked out 1 warning sign for Jarir Marketing that investors should know about before committing capital to this stock. 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.