Response Plus Holding PJSC (ADX:RPM) Goes Ex-Dividend Soon

Response Plus Holding PJSC (ADX:RPM) stock is about to trade ex-dividend in three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Accordingly, Response Plus Holding PJSC investors that purchase the stock on or after the 18th of April will not 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, and in the last 12 months, the company paid a total of د.إ0.15 per share. Based on the last year's worth of payments, Response Plus Holding PJSC has a trailing yield of 3.6% on the current stock price of د.إ4.12. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Response Plus Holding PJSC's payout ratio is modest, at just 29% of profit. 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. Over the last year, it paid out more than three-quarters (87%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Response Plus Holding PJSC'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.

See our latest analysis for Response Plus Holding PJSC

Click here to see how much of its profit Response Plus Holding PJSC paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Response Plus Holding PJSC's earnings per share have plummeted approximately 90% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Response Plus Holding PJSC's dividend payments per share have declined at 45% per year on average over the past two years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

The Bottom Line

From a dividend perspective, should investors buy or avoid Response Plus Holding PJSC? Earnings per share have fallen significantly, although at least Response Plus Holding PJSC paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. In summary, while it has some positive characteristics, we're not inclined to race out and buy Response Plus Holding PJSC today.

Curious about whether Response Plus Holding PJSC has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

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.