Here's What We Like About Al Rajhi Banking and Investment's (TADAWUL:1120) Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Al Rajhi Banking and Investment Corporation (TADAWUL:1120) is about to go ex-dividend in just 3 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. 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. Therefore, if you purchase Al Rajhi Banking and Investment's shares on or after the 24th of September, you won't be eligible to receive the dividend, when it is paid on the 2nd of October.

The company's upcoming dividend is ر.س0.75 a share, following on from the last 12 months, when the company distributed a total of ر.س2.92 per share to shareholders. Last year's total dividend payments show that Al Rajhi Banking and Investment has a trailing yield of 3.1% on the current share price of ر.س94.80. 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! So we need to investigate whether Al Rajhi Banking and Investment can afford its dividend, and if the dividend could grow.

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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 Al Rajhi Banking and Investment's payout ratio is modest, at just 27% of profit.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

See our latest analysis for Al Rajhi Banking and Investment

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Al Rajhi Banking and Investment's earnings per share have been growing at 16% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Al Rajhi Banking and Investment has lifted its dividend by approximately 14% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Has Al Rajhi Banking and Investment got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Al Rajhi Banking and Investment ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Al Rajhi Banking and Investment for the dividends alone, you should always be mindful of the risks involved. For example - Al Rajhi Banking and Investment has 1 warning sign we think you should be aware of.

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.