Gas Arabian Services Company (TADAWUL:9528) Goes Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Gas Arabian Services Company (TADAWUL:9528) is about to trade ex-dividend in the next 2 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Gas Arabian Services investors that purchase the stock on or after the 11th of March will not receive the dividend, which will be paid on the 26th of March.

The company's next dividend payment will be ر.س0.23 per share. Last year, in total, the company distributed ر.س0.30 to shareholders. Based on the last year's worth of payments, Gas Arabian Services stock has a trailing yield of around 1.9% on the current share price of ر.س15.68. If you buy this business for its dividend, you should have an idea of whether Gas Arabian Services's dividend is reliable and sustainable. As a result, readers should always check whether Gas Arabian Services has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Gas Arabian Services

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Gas Arabian Services paying out a modest 26% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 78% 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 Gas Arabian Services'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 Gas Arabian Services 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Gas Arabian Services earnings per share are up 3.3% per annum over the last five years. A payout ratio of 26% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past two years, Gas Arabian Services has increased its dividend at approximately 15% a year on average. 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.

The Bottom Line

Is Gas Arabian Services an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest, and it's interesting that Gas Arabian Services is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. In summary, it's hard to get excited about Gas Arabian Services from a dividend perspective.

So while Gas Arabian Services looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with Gas Arabian Services and understanding them should be part of your investment process.

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.