We Wouldn't Be Too Quick To Buy BENA Steel Industries (TADAWUL:9563) Before It Goes Ex-Dividend
BENA Steel Industries (TADAWUL:9563) stock is about to trade ex-dividend in three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase BENA Steel Industries' shares on or after the 14th of September, you won't be eligible to receive the dividend, when it is paid on the 27th of September.
The company's next dividend payment will be ر.س0.65 per share, and in the last 12 months, the company paid a total of ر.س0.83 per share. Looking at the last 12 months of distributions, BENA Steel Industries has a trailing yield of approximately 2.6% on its current stock price of ر.س32.50. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether BENA Steel Industries has been able to grow its dividends, or if the dividend might be cut.
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. BENA Steel Industries distributed an unsustainably high 137% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. 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.
It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and BENA Steel Industries fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.
Check out our latest analysis for BENA Steel Industries
Click here to see how much of its profit BENA Steel Industries paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that BENA Steel Industries's earnings are down 3.1% a year over the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past two years, BENA Steel Industries has increased its dividend at approximately 5.2% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. BENA Steel Industries is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
To Sum It Up
Is BENA Steel Industries an attractive dividend stock, or better left on the shelf? It's not a great combination to see a company with earnings in decline and paying out 137% of its profits, which could imply the dividend may be at risk of being cut in the future. Yet cashflow was much stronger, which makes us wonder if there are some large timing issues in BENA Steel Industries's cash flows, or perhaps the company has written down some assets aggressively, reducing its income. It's not that we think BENA Steel Industries is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
So if you're still interested in BENA Steel Industries despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 5 warning signs for BENA Steel Industries that we strongly recommend you have a look at before investing in the company.
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.