Saudi Telecom's (TADAWUL:7010) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Saudi Telecom Company (TADAWUL:7010) has announced that it will be paying its dividend of SAR0.55 on the 24th of March, an increased payment from last year's comparable dividend. The payment will take the dividend yield to 4.8%, which is in line with the average for the industry.

View our latest analysis for Saudi Telecom

Saudi Telecom's Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, Saudi Telecom's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 33.5%. If recent patterns in the dividend continue, we could see the payout ratio reaching 85% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Saudi Telecom Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from SAR1.20 total annually to SAR2.20. This means that it has been growing its distributions at 6.2% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Saudi Telecom has been growing its earnings per share at 18% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Saudi Telecom Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Saudi Telecom is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Saudi Telecom that you should be aware of before investing. 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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