National Gas & Industerialization (TADAWUL:2080) Will Pay A Larger Dividend Than Last Year At SAR0.85

The board of National Gas & Industerialization Co. (TADAWUL:2080) has announced that the dividend on 29th of September will be increased to SAR0.85, which will be 13% higher than last year's payment of SAR0.75 which covered the same period. The payment will take the dividend yield to 3.2%, which is in line with the average for the industry.

See our latest analysis for National Gas & Industerialization

National Gas & Industerialization's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, National Gas & Industerialization's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share could rise by 3.3% 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

The company has a long dividend track record, but it doesn't look great with cuts in the past. The last annual payment of SAR1.50 was flat on the annual payment from10 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

National Gas & Industerialization May Find It Hard To Grow The Dividend

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. Earnings per share has been crawling upwards at 3.3% per year. The company has been growing at a pretty soft 3.3% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On National Gas & Industerialization'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 redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for National Gas & Industerialization that investors need to be conscious of moving forward. Is National Gas & Industerialization not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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