Is It Smart To Buy Electrical Industries Company (TADAWUL:1303) Before It Goes Ex-Dividend?

Electrical Industries Company (TADAWUL:1303) stock is about to trade ex-dividend in 3 days. The ex-dividend date generally occurs two days 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Electrical Industries' shares before the 23rd of March in order to be eligible for the dividend, which will be paid on the 13th of April.

The company's next dividend payment will be ر.س0.125 per share, and in the last 12 months, the company paid a total of ر.س0.20 per share. Based on the last year's worth of payments, Electrical Industries has a trailing yield of 3.2% on the current stock price of ر.س6.17. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Electrical Industries

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. Electrical Industries paid out 55% of its earnings to investors last year, a normal payout level for most businesses.

Click here to see how much of its profit Electrical Industries paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Electrical Industries's earnings have been skyrocketing, up 64% per annum for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Electrical Industries has delivered an average of 9.1% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Should investors buy Electrical Industries for the upcoming dividend? Earnings per share are growing at an attractive rate, and Electrical Industries is paying out a bit over half its profits. In summary, Electrical Industries appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

So while Electrical Industries 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 Electrical Industries that we recommend you consider before investing in the business.

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.