National Gas and Industrialization (TADAWUL:2080) Is Increasing Its Dividend To SAR1.10

National Gas and Industrialization Company (TADAWUL:2080) has announced that it will be increasing its periodic dividend on the 22nd of July to SAR1.10, which will be 10% higher than last year's comparable payment amount of SAR1.00. Although the dividend is now higher, the yield is only 2.3%, which is below the industry average.

Check out our latest analysis for National Gas and Industrialization

National Gas and Industrialization's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last dividend, National Gas and Industrialization is earning enough to cover the payment, but then it makes up 264% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 10.2% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 61% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was SAR1.75 in 2014, and the most recent fiscal year payment was SAR2.00. This implies that the company grew its distributions at a yearly rate of about 1.3% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. National Gas and Industrialization has seen EPS rising for the last five years, at 10% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On National Gas and Industrialization's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think National Gas and Industrialization is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 National Gas and Industrialization that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com