Kingdom Holding Company (TADAWUL:4280) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Kingdom Holding Company (TADAWUL:4280) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Kingdom Holding's shares on or after the 1st of January will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be ر.س0.07 per share, on the back of last year when the company paid a total of ر.س0.28 to shareholders. Calculating the last year's worth of payments shows that Kingdom Holding has a trailing yield of 3.1% on the current share price of ر.س8.94. If you buy this business for its dividend, you should have an idea of whether Kingdom Holding's dividend is reliable and sustainable. So we need to investigate whether Kingdom Holding can afford its dividend, and if the dividend could grow.

View our latest analysis for Kingdom Holding

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. It paid out 77% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Kingdom Holding 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Kingdom Holding's earnings per share have been growing at 14% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kingdom Holding has seen its dividend decline 11% per annum on average over the past five years, which is not great to see. Kingdom Holding is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Should investors buy Kingdom Holding for the upcoming dividend? Earnings per share are growing nicely, and Kingdom Holding is paying out a percentage of its earnings that is around the average for dividend-paying stocks. In summary, Kingdom Holding appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

So while Kingdom Holding looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 2 warning signs for Kingdom Holding that we recommend you consider before investing in the business.

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.

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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.