Dividend Investors: Don't Be Too Quick To Buy Al Ansari Financial Services PJSC (DFM:ALANSARI) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Al Ansari Financial Services PJSC (DFM:ALANSARI) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Al Ansari Financial Services PJSC investors that purchase the stock on or after the 26th of September will not receive the dividend, which will be paid on the 15th of October.

The company's next dividend payment will be د.إ0.0198 per share, on the back of last year when the company paid a total of د.إ0.042 to shareholders. Based on the last year's worth of payments, Al Ansari Financial Services PJSC stock has a trailing yield of around 4.3% on the current share price of د.إ0.98. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Its dividend payout ratio is 76% 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 worried about the risk of a drop in earnings.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

View our latest analysis for Al Ansari Financial Services PJSC

Click here to see how much of its profit Al Ansari Financial Services PJSC paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Al Ansari Financial Services PJSC's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 82% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Al Ansari Financial Services PJSC's dividend payments per share have declined at 28% per year on average over the past two years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

To Sum It Up

Is Al Ansari Financial Services PJSC worth buying for its dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Al Ansari Financial Services PJSC. To help with this, we've discovered 2 warning signs for Al Ansari Financial Services PJSC (1 is a bit concerning!) that you ought to be aware of before buying the shares.

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.