Emaar Development PJSC (DFM:EMAARDEV) Looks Interesting, And It's About To Pay A Dividend

Emaar Development PJSC (DFM:EMAARDEV) is about to trade ex-dividend in the next 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Emaar Development PJSC investors that purchase the stock on or after the 4th 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.إ0.68 per share, on the back of last year when the company paid a total of د.إ0.68 to shareholders. Looking at the last 12 months of distributions, Emaar Development PJSC has a trailing yield of approximately 5.6% on its current stock price of د.إ12.25. If you buy this business for its dividend, you should have an idea of whether Emaar Development PJSC's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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 Emaar Development PJSC's payout ratio is modest, at just 36% of profit. A useful secondary check can be to evaluate whether Emaar Development PJSC generated enough free cash flow to afford its dividend. The good news is it paid out just 19% of its free cash flow in the last year.

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.

View our latest analysis for Emaar Development PJSC

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Emaar Development PJSC has grown its earnings rapidly, up 23% a year for the past five years. Emaar Development PJSC is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Emaar Development PJSC has delivered 3.9% dividend growth per year on average over the past seven years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Is Emaar Development PJSC worth buying for its dividend? It's great that Emaar Development PJSC is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Emaar Development PJSC, and we would prioritise taking a closer look at it.

So while Emaar Development PJSC looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with Emaar Development PJSC and understanding them should be part of your investment process.

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.