Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Commercial Bank of Dubai PSC (DFM:CBD) is about to trade ex-dividend in the next two days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. This means that investors who purchase Commercial Bank of Dubai PSC's shares on or after the 25th of March will not receive the dividend, which will be paid on the 1st of January.
The company's next dividend payment will be د.إ0.26 per share, and in the last 12 months, the company paid a total of د.إ0.26 per share. Last year's total dividend payments show that Commercial Bank of Dubai PSC has a trailing yield of 5.2% on the current share price of AED5. 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 Commercial Bank of Dubai PSC has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Commercial Bank of Dubai PSC paid out 55% of its earnings to investors last year, a normal payout level for most businesses.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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 Commercial Bank of Dubai PSC earnings per share are up 5.6% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Commercial Bank of Dubai PSC has lifted its dividend by approximately 6.5% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Should investors buy Commercial Bank of Dubai PSC for the upcoming dividend? Commercial Bank of Dubai PSC has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
However if you're still interested in Commercial Bank of Dubai PSC as a potential investment, you should definitely consider some of the risks involved with Commercial Bank of Dubai PSC. Case in point: We've spotted 1 warning sign for Commercial Bank of Dubai PSC you should be aware of.
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.