Emirates Central Cooling Systems Corporation (DFM:EMPOWER) Goes Ex-Dividend Soon

Readers hoping to buy Emirates Central Cooling Systems Corporation (DFM:EMPOWER) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Emirates Central Cooling Systems' shares on or after the 2nd of October will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be د.إ0.0425 per share, on the back of last year when the company paid a total of د.إ0.085 to shareholders. Last year's total dividend payments show that Emirates Central Cooling Systems has a trailing yield of 4.9% on the current share price of د.إ1.73. If you buy this business for its dividend, you should have an idea of whether Emirates Central Cooling Systems'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.

View our latest analysis for Emirates Central Cooling Systems

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Emirates Central Cooling Systems's payout ratio is modest, at just 45% of profit. A useful secondary check can be to evaluate whether Emirates Central Cooling Systems generated enough free cash flow to afford its dividend. Over the last year it paid out 64% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Emirates Central Cooling Systems'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.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Emirates Central Cooling Systems's earnings per share have plummeted approximately 53% 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. In the past two years, Emirates Central Cooling Systems has increased its dividend at approximately 41% a year on average.

To Sum It Up

Should investors buy Emirates Central Cooling Systems for the upcoming dividend? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Emirates Central Cooling Systems's dividend merits.

If you want to look further into Emirates Central Cooling Systems, it's worth knowing the risks this business faces. For example, we've found 2 warning signs for Emirates Central Cooling Systems that we recommend you consider before investing in the business.

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.