Kingdom Holding Company's (TADAWUL:4280) investors are due to receive a payment of SAR0.07 per share on 1st of January. Based on this payment, the dividend yield on the company's stock will be 3.6%, which is an attractive boost to shareholder returns.

Estimates Indicate Kingdom Holding's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last payment made up 83% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 26.4% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 106%, which could put the dividend under pressure if earnings don't start to improve.

Kingdom Holding's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from SAR0.50 total annually to SAR0.28. This works out to be a decline of approximately 9.2% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Kingdom Holding's Dividend Might Lack Growth

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Kingdom Holding has impressed us by growing EPS at 15% per year over the past five years. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

Our Thoughts On Kingdom Holding's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

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. Is Kingdom Holding 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.