We Wouldn't Be Too Quick To Buy Emirates Integrated Telecommunications Company PJSC (DFM:DU) Before It Goes Ex-Dividend

Emirates Integrated Telecommunications Company PJSC (DFM:DU) is about to trade ex-dividend in the next 4 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 as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Emirates Integrated Telecommunications Company PJSC's shares before the 26th of March in order to be eligible for the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be د.إ0.34 per share. Last year, in total, the company distributed د.إ0.54 to shareholders. Looking at the last 12 months of distributions, Emirates Integrated Telecommunications Company PJSC has a trailing yield of approximately 6.6% on its current stock price of د.إ8.15. 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.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year Emirates Integrated Telecommunications Company PJSC paid out 98% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. A useful secondary check can be to evaluate whether Emirates Integrated Telecommunications Company PJSC generated enough free cash flow to afford its dividend. Over the last year it paid out 68% of its free cash flow as dividends, within the usual range for most companies.

It's good to see that while Emirates Integrated Telecommunications Company PJSC's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

Check out our latest analysis for Emirates Integrated Telecommunications Company PJSC

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Emirates Integrated Telecommunications Company PJSC earnings per share are up 7.5% per annum over the last five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Emirates Integrated Telecommunications Company PJSC has lifted its dividend by approximately 5.7% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy Emirates Integrated Telecommunications Company PJSC for the upcoming dividend? While earnings per share have been growing slowly, Emirates Integrated Telecommunications Company PJSC is paying out an uncomfortably high percentage of its earnings. However it did pay out a lower percentage of its cashflow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

So if you're still interested in Emirates Integrated Telecommunications Company PJSC despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Case in point: We've spotted 1 warning sign for Emirates Integrated Telecommunications Company PJSC 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.