There's A Lot To Like About Al-Modawat Specialized Medical's (TADAWUL:9594) Upcoming ر.س0.02 Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Al-Modawat Specialized Medical Company (TADAWUL:9594) is about to go ex-dividend in just 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Meaning, you will need to purchase Al-Modawat Specialized Medical's shares before the 19th of October to receive the dividend, which will be paid on the 1st of November.
The company's upcoming dividend is ر.س0.02 a share, following on from the last 12 months, when the company distributed a total of ر.س0.12 per share to shareholders. Based on the last year's worth of payments, Al-Modawat Specialized Medical has a trailing yield of 2.7% on the current stock price of ر.س4.40. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Al-Modawat Specialized Medical has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Al-Modawat Specialized Medical's payout ratio is modest, at just 38% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 37% of its free cash flow in the past year.
It's positive to see that Al-Modawat Specialized Medical'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.
View 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?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Al-Modawat Specialized Medical earnings per share are up 4.5% per annum over the last five years. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Al-Modawat Specialized Medical has seen its dividend decline 28% per annum on average over the past two years, which is not great to see. 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.
To Sum It Up
Should investors buy Al-Modawat Specialized Medical for the upcoming dividend? Earnings per share growth has been growing somewhat, and Al-Modawat Specialized Medical is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Al-Modawat Specialized Medical is being conservative with its dividend payouts and could still perform reasonably over the long run. Al-Modawat Specialized Medical looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks Al-Modawat Specialized Medical is facing. Every company has risks, and we've spotted 3 warning signs for Al-Modawat Specialized Medical you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.