Raoom trading (TADAWUL:4144) Could Be A Buy For Its Upcoming Dividend

It looks like Raoom trading Company (TADAWUL:4144) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Raoom trading investors that purchase the stock on or after the 19th of February will not receive the dividend, which will be paid on the 27th of February.

The company's next dividend payment will be ر.س0.75 per share, on the back of last year when the company paid a total of ر.س2.25 to shareholders. Based on the last year's worth of payments, Raoom trading has a trailing yield of 1.2% on the current stock price of ر.س186.00. If you buy this business for its dividend, you should have an idea of whether Raoom trading's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Raoom trading

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Raoom trading paid out a comfortable 32% of its profit last year.

Click here to see how much of its profit Raoom trading 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. It's encouraging to see Raoom trading has grown its earnings rapidly, up 42% a year for the past five years. Raoom trading 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Raoom trading has delivered 31% dividend growth per year on average over the past three years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

From a dividend perspective, should investors buy or avoid Raoom trading? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, Raoom trading appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while Raoom trading has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Raoom trading 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.