Is It Smart To Buy Astra Industrial Group Company (TADAWUL:1212) Before It Goes Ex-Dividend?

It looks like Astra Industrial Group Company (TADAWUL:1212) is about to go ex-dividend in the next three 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. This means that investors who purchase Astra Industrial Group's shares on or after the 21st of April will not receive the dividend, which will be paid on the 29th of April.

The company's next dividend payment will be ر.س3.00 per share, and in the last 12 months, the company paid a total of ر.س2.50 per share. Looking at the last 12 months of distributions, Astra Industrial Group has a trailing yield of approximately 1.6% on its current stock price of ر.س153.20. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Our free stock report includes 1 warning sign investors should be aware of before investing in Astra Industrial Group. Read for free now.

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. That's why it's good to see Astra Industrial Group paying out a modest 37% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 43% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Astra Industrial Group'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.

Check out our latest analysis for Astra Industrial Group

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Astra Industrial Group's earnings have been skyrocketing, up 79% per annum for the past five years. Astra Industrial Group is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

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, Astra Industrial Group has lifted its dividend by approximately 4.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Astra Industrial Group is keeping back more of its profits to grow the business.

To Sum It Up

From a dividend perspective, should investors buy or avoid Astra Industrial Group? Astra Industrial Group has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

So while Astra Industrial Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for Astra Industrial Group 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.