Thob Al Aseel Company (TADAWUL:4012) 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 Thob Al Aseel Company (TADAWUL:4012) is about to trade ex-dividend in the next two days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. Meaning, you will need to purchase Thob Al Aseel's shares before the 28th of July to receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be ر.س0.10 per share, on the back of last year when the company paid a total of ر.س0.19 to shareholders. Based on the last year's worth of payments, Thob Al Aseel has a trailing yield of 4.7% on the current stock price of ر.س4.03. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Thob Al Aseel is paying out an acceptable 71% of its profit, a common payout level among most companies. 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. Fortunately, it paid out only 31% of its free cash flow in the past year.

It's positive to see that Thob Al Aseel'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.

View our latest analysis for Thob Al Aseel

Click here to see how much of its profit Thob Al Aseel paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Thob Al Aseel, with earnings per share up 5.9% on average over the last five years. Decent historical earnings per share growth suggests Thob Al Aseel has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Thob Al Aseel has delivered 3.0% dividend growth per year on average over the past eight years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Thob Al Aseel an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest and Thob Al Aseel paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. In summary, while it has some positive characteristics, we're not inclined to race out and buy Thob Al Aseel today.

On that note, you'll want to research what risks Thob Al Aseel is facing. For example - Thob Al Aseel has 1 warning sign we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.