Income Investors Should Know That Bawan Company (TADAWUL:1302) Goes Ex-Dividend Soon

Bawan Company (TADAWUL:1302) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Bawan's shares before the 29th of September in order to receive the dividend, which the company will pay on the 10th of October.

The company's next dividend payment will be ر.س0.60 per share, on the back of last year when the company paid a total of ر.س1.45 to shareholders. Calculating the last year's worth of payments shows that Bawan has a trailing yield of 3.5% on the current share price of ر.س41.55. 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.

See our latest analysis for Bawan

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bawan is paying out an acceptable 69% of its profit, a common payout level among most companies. 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. It paid out 87% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that Bawan'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 how much of its profit Bawan paid out over the last 12 months.

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. It's encouraging to see Bawan has grown its earnings rapidly, up 36% 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. Bawan has delivered an average of 5.7% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Is Bawan worth buying for its dividend? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Bawan's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 69% and 87% respectively. Overall, it's hard to get excited about Bawan from a dividend perspective.

On that note, you'll want to research what risks Bawan is facing. In terms of investment risks, we've identified 1 warning sign with Bawan and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.