Saudi Telecom (TADAWUL:7010) Will Pay A Dividend Of SAR0.40

Saudi Telecom Company (TADAWUL:7010) will pay a dividend of SAR0.40 on the 23rd of November. Based on this payment, the dividend yield will be 4.2%, which is fairly typical for the industry.

Check out our latest analysis for Saudi Telecom

Saudi Telecom's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Saudi Telecom's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 20.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.

Saudi Telecom Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of SAR0.80 in 2013 to the most recent total annual payment of SAR1.60. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Earnings has been rising at 4.2% per annum over the last five years, which admittedly is a bit slow. Saudi Telecom is struggling to find viable investments, so it is returning more to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Saudi Telecom Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Saudi Telecom might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 12 Saudi Telecom analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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