Here's What We Like About Al-Babtain Power and Telecommunications' (TADAWUL:2320) Upcoming Dividend

Readers hoping to buy Al-Babtain Power and Telecommunications Company (TADAWUL:2320) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. Meaning, you will need to purchase Al-Babtain Power and Telecommunications' shares before the 1st of December to receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be ر.س1.00 per share, and in the last 12 months, the company paid a total of ر.س2.00 per share. Looking at the last 12 months of distributions, Al-Babtain Power and Telecommunications has a trailing yield of approximately 3.1% on its current stock price of ر.س64.40. If you buy this business for its dividend, you should have an idea of whether Al-Babtain Power and Telecommunications's dividend is reliable and sustainable. As a result, readers should always check whether Al-Babtain Power and Telecommunications has been able to grow its dividends, or if the dividend might be cut.

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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-Babtain Power and Telecommunications's payout ratio is modest, at just 48% of profit. 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 distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for Al-Babtain Power and Telecommunications

Click here to see how much of its profit Al-Babtain Power and Telecommunications 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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Al-Babtain Power and Telecommunications's earnings have been skyrocketing, up 36% per annum for the past five years. Al-Babtain Power and Telecommunications is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Al-Babtain Power and Telecommunications has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

From a dividend perspective, should investors buy or avoid Al-Babtain Power and Telecommunications? Al-Babtain Power and Telecommunications 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. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Al-Babtain Power and Telecommunications for the dividends alone, you should always be mindful of the risks involved. For example - Al-Babtain Power and Telecommunications has 2 warning signs we think you should be aware of.

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.