Saudi Telecom (TADAWUL:7010) Has Announced A Dividend Of ر.س1.00

Saudi Telecom Company's (TADAWUL:7010) investors are due to receive a payment of ر.س1.00 per share on 26th of August. This means that the annual payment will be 3.7% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Saudi Telecom

Saudi Telecom's Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before making this announcement, Saudi Telecom's dividend was higher than its profits, but the free cash flows quite comfortably covered it. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to grow by 44.2% over the next year. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 86%, which is on the higher side, but certainly still feasible.

Saudi Telecom Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from ر.س3.00 in 2011 to the most recent annual payment of ر.س4.00. This means that it has been growing its distributions at 2.9% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, initial appearances might be deceiving. However, Saudi Telecom's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Saudi Telecom's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Saudi Telecom's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

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. For instance, we've picked out 1 warning sign for Saudi Telecom that investors should take into consideration. We have also put together a list of global stocks with a solid dividend.

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