National Gas and Industrialization (TADAWUL:2080) Will Pay A Dividend Of SAR1.10

National Gas and Industrialization Company (TADAWUL:2080) will pay a dividend of SAR1.10 on the 29th of January. Although the dividend is now higher, the yield is only 2.2%, which is below the industry average.

Check out our latest analysis for National Gas and Industrialization

National Gas and Industrialization's Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last dividend, National Gas and Industrialization is earning enough to cover the payment, but then it makes up 389% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Over the next year, EPS could expand by 14.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 64% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of SAR2.15 in 2014 to the most recent total annual payment of SAR2.20. Dividend payments have grown at less than 1% a year over this period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

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. It's encouraging to see that National Gas and Industrialization has been growing its earnings per share at 14% a year over the past five years. 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 National Gas and Industrialization is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for National Gas and Industrialization 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.