Only Three Days Left To Cash In On Dubai Electricity and Water Authority (PJSC)'s (DFM:DEWA) Dividend

Readers hoping to buy Dubai Electricity and Water Authority (PJSC) (DFM:DEWA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a 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. Thus, you can purchase Dubai Electricity and Water Authority (PJSC)'s shares before the 16th of October in order to receive the dividend, which the company will pay on the 29th of October.

The company's next dividend payment will be د.إ0.062 per share, on the back of last year when the company paid a total of د.إ0.12 to shareholders. Looking at the last 12 months of distributions, Dubai Electricity and Water Authority (PJSC) has a trailing yield of approximately 4.5% on its current stock price of د.إ2.75. 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! We need to see whether the dividend is covered by earnings and if it's 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.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Dubai Electricity and Water Authority (PJSC) paying out a modest 43% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 54% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Dubai Electricity and Water Authority (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 Dubai Electricity and Water Authority (PJSC)

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 Dubai Electricity and Water Authority (PJSC), with earnings per share up 5.8% on average over the last five years. Decent historical earnings per share growth suggests Dubai Electricity and Water Authority (PJSC) 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Dubai Electricity and Water Authority (PJSC)'s dividend payments are effectively flat on where they were three years ago.

To Sum It Up

From a dividend perspective, should investors buy or avoid Dubai Electricity and Water Authority (PJSC)? Earnings per share have been growing at a steady rate, and Dubai Electricity and Water Authority (PJSC) paid out less than half its profits and more than half its free cash flow as dividends over the last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Dubai Electricity and Water Authority (PJSC)'s dividend merits.

Wondering what the future holds for Dubai Electricity and Water Authority (PJSC)? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.