Al-Dawaa Medical Services Company (TADAWUL:4163) Goes Ex-Dividend Soon

Readers hoping to buy Al-Dawaa Medical Services Company (TADAWUL:4163) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Al-Dawaa Medical Services' shares before the 13th of February in order to be eligible for the dividend, which will be paid on the 25th of February.

The company's next dividend payment will be ر.س1.25 per share, on the back of last year when the company paid a total of ر.س2.50 to shareholders. Based on the last year's worth of payments, Al-Dawaa Medical Services stock has a trailing yield of around 2.1% on the current share price of ر.س116.60. 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.

See our latest analysis for Al-Dawaa Medical Services

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Al-Dawaa Medical Services is paying out an acceptable 65% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Al-Dawaa Medical Services generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 30% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Al-Dawaa Medical 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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Al-Dawaa Medical Services's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 85% a year over the past five years.

Given that Al-Dawaa Medical Services has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

From a dividend perspective, should investors buy or avoid Al-Dawaa Medical Services? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. To summarise, Al-Dawaa Medical Services looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that being said, if dividends aren't your biggest concern with Al-Dawaa Medical Services, you should know about the other risks facing this business. Every company has risks, and we've spotted 2 warning signs for Al-Dawaa Medical Services you should know about.

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.