Dubai Refreshment (P.J.S.C.) (DFM:DRC) Passed Our Checks, And It's About To Pay A د.إ1.10 Dividend

Dubai Refreshment (P.J.S.C.) (DFM:DRC) stock is about to trade ex-dividend in four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. In other words, investors can purchase Dubai Refreshment (P.J.S.C.)'s shares before the 14th of October in order to be eligible for the dividend, which will be paid on the 23rd of October.

The company's next dividend payment will be د.إ1.10 per share. Last year, in total, the company distributed د.إ1.10 to shareholders. Last year's total dividend payments show that Dubai Refreshment (P.J.S.C.) has a trailing yield of 3.9% on the current share price of د.إ28.00. If you buy this business for its dividend, you should have an idea of whether Dubai Refreshment (P.J.S.C.)'s dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Dubai Refreshment (P.J.S.C.) is paying out an acceptable 59% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 4.2% of its free cash flow last year.

It's positive to see that Dubai Refreshment (P.J.S.C.)'s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Dubai Refreshment (P.J.S.C.)

Click here to see how much of its profit Dubai Refreshment (P.J.S.C.) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Dubai Refreshment (P.J.S.C.)'s earnings have been skyrocketing, up 26% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Dubai Refreshment (P.J.S.C.) could have strong prospects for future increases to the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Dubai Refreshment (P.J.S.C.) has delivered an average of 4.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Should investors buy Dubai Refreshment (P.J.S.C.) for the upcoming dividend? We like Dubai Refreshment (P.J.S.C.)'s growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Dubai Refreshment (P.J.S.C.) looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Dubai Refreshment (P.J.S.C.) for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Dubai Refreshment (P.J.S.C.) that we recommend you consider before investing in the business.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.