Just Three Days Till Almunajem Foods Company (TADAWUL:4162) Will Be Trading Ex-Dividend

Almunajem Foods Company (TADAWUL:4162) is about to trade ex-dividend in the next three 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Almunajem Foods' shares on or after the 9th of December, you won't be eligible to receive the dividend, when it is paid on the 18th of December.

The company's next dividend payment will be ر.س2.00 per share, and in the last 12 months, the company paid a total of ر.س3.25 per share. Calculating the last year's worth of payments shows that Almunajem Foods has a trailing yield of 3.4% on the current share price of ر.س96.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Almunajem Foods has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Almunajem Foods

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 Almunajem Foods paying out a modest 25% of its earnings. A useful secondary check can be to evaluate whether Almunajem Foods generated enough free cash flow to afford its dividend. Over the last year it paid out 52% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Almunajem Foods'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 Almunajem Foods paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Almunajem Foods's 13% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, three years ago, Almunajem Foods has lifted its dividend by approximately 18% a year on average.

The Bottom Line

Is Almunajem Foods an attractive dividend stock, or better left on the shelf? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

With that being said, if dividends aren't your biggest concern with Almunajem Foods, you should know about the other risks facing this business. For example, we've found 1 warning sign for Almunajem Foods that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.