Al Masane Al Kobra Mining Company's (TADAWUL:1322) periodic dividend will be increasing on the 1st of January to SAR1.25, with investors receiving 39% more than last year's SAR0.90. Despite this raise, the dividend yield of 3.2% is only a modest boost to shareholder returns.

Al Masane Al Kobra Mining's Future Dividends May Potentially Be At Risk

If it is predictable over a long period, even low dividend yields can be attractive. The last payment was quite easily covered by earnings, but it made up 105% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Earnings per share is forecast to rise by 12.8% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 117%, which is a bit high and could start applying pressure to the balance sheet.

Al Masane Al Kobra Mining's Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The dividend has gone from an annual total of SAR2.93 in 2022 to the most recent total annual payment of SAR2.08. Dividend payments have fallen sharply, down 29% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. However, Al Masane Al Kobra Mining has only grown its earnings per share at 2.3% per annum over the past three years. Growth of 2.3% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Al Masane Al Kobra Mining's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Al Masane Al Kobra Mining's payments are rock solid. While the low payout ratio is a 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Is Al Masane Al Kobra Mining not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.