Three Days Left To Buy Saudi Aramco Base Oil Company - Luberef (TADAWUL:2223) Before The Ex-Dividend Date

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Saudi Aramco Base Oil Company - Luberef (TADAWUL:2223) is about to trade ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Saudi Aramco Base Oil Company - Luberef's shares on or after the 4th of October will not receive the dividend, which will be paid on the 15th of October.

The company's upcoming dividend is ر.س4.00 a share, following on from the last 12 months, when the company distributed a total of ر.س4.50 per share to shareholders. Based on the last year's worth of payments, Saudi Aramco Base Oil Company - Luberef has a trailing yield of 3.5% on the current stock price of ر.س129.30. If you buy this business for its dividend, you should have an idea of whether Saudi Aramco Base Oil Company - Luberef's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Last year Saudi Aramco Base Oil Company - Luberef paid out 91% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 40% of its free cash flow in the past year.

It's good to see that while Saudi Aramco Base Oil Company - Luberef's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

View our latest analysis for Saudi Aramco Base Oil Company - Luberef

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Saudi Aramco Base Oil Company - Luberef has grown its earnings rapidly, up 76% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Saudi Aramco Base Oil Company - Luberef's dividend payments per share have declined at 2.6% per year on average over the past four years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

Is Saudi Aramco Base Oil Company - Luberef an attractive dividend stock, or better left on the shelf? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Saudi Aramco Base Oil Company - Luberef is paying out so much of its profit. All things considered, we are not particularly enthused about Saudi Aramco Base Oil Company - Luberef from a dividend perspective.

So while Saudi Aramco Base Oil Company - Luberef looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Saudi Aramco Base Oil Company - Luberef (1 is a bit concerning!) that you ought to be aware of before buying the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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.