Here's What We Like About Al-Modawat Specialized Medical's (TADAWUL:9594) Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Al-Modawat Specialized Medical Company (TADAWUL:9594) is about to trade ex-dividend in the next 3 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Al-Modawat Specialized Medical's shares before the 17th of September in order to be eligible for the dividend, which will be paid on the 1st of October.
The company's next dividend payment will be ر.س0.02 per share, and in the last 12 months, the company paid a total of ر.س0.12 per share. Last year's total dividend payments show that Al-Modawat Specialized Medical has a trailing yield of 2.5% on the current share price of ر.س4.80. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Al-Modawat Specialized Medical paid out a comfortable 38% of its profit last year. 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. Thankfully its dividend payments took up just 37% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Check out our latest analysis for Al-Modawat Specialized Medical
Click here to see how much of its profit Al-Modawat Specialized Medical 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Al-Modawat Specialized Medical, with earnings per share up 4.5% on average over the last five years. Recent growth has not been impressive. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Al-Modawat Specialized Medical's dividend payments per share have declined at 28% per year on average over the past two years, which is uninspiring. Al-Modawat Specialized Medical is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
To Sum It Up
Is Al-Modawat Specialized Medical worth buying for its dividend? Earnings per share have been growing moderately, and Al-Modawat Specialized Medical is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Al-Modawat Specialized Medical is halfway there. It's a promising combination that should mark this company worthy of closer attention.
So while Al-Modawat Specialized Medical looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To that end, you should learn about the 3 warning signs we've spotted with Al-Modawat Specialized Medical (including 1 which shouldn't be ignored).
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.