Read This Before Considering R.A.K. Ceramics P.J.S.C. (ADX:RAKCEC) For Its Upcoming د.إ0.10 Dividend

R.A.K. Ceramics P.J.S.C. (ADX:RAKCEC) is about to trade ex-dividend in the next 4 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. Meaning, you will need to purchase R.A.K. Ceramics P.J.S.C's shares before the 2nd of April to receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be د.إ0.10 per share. Last year, in total, the company distributed د.إ0.20 to shareholders. Calculating the last year's worth of payments shows that R.A.K. Ceramics P.J.S.C has a trailing yield of 7.8% on the current share price of د.إ2.58. 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.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 90% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. 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. It distributed 50% of its free cash flow as dividends, a comfortable payout level for most companies.

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 R.A.K. Ceramics P.J.S.C

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. With that in mind, we're encouraged by the steady growth at R.A.K. Ceramics P.J.S.C, with earnings per share up 6.1% on average over the last five years. Decent historical earnings per share growth suggests R.A.K. Ceramics P.J.S.C has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the R.A.K. Ceramics P.J.S.C dividends are largely the same as they were 10 years ago.

The Bottom Line

Is R.A.K. Ceramics P.J.S.C an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest and R.A.K. Ceramics P.J.S.C paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. Overall, it's hard to get excited about R.A.K. Ceramics P.J.S.C from a dividend perspective.

So while R.A.K. Ceramics P.J.S.C looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 2 warning signs for R.A.K. Ceramics P.J.S.C you should be aware of.

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.