National Shipping Company of Saudi Arabia (TADAWUL:4030) Could Be A Buy For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The National Shipping Company of Saudi Arabia (TADAWUL:4030) is about to trade ex-dividend in the next three 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. In other words, investors can purchase National Shipping Company of Saudi Arabia's shares before the 5th of June in order to be eligible for the dividend, which will be paid on the 1st of January.

The company's upcoming dividend is ر.س0.55 a share, following on from the last 12 months, when the company distributed a total of ر.س0.55 per share to shareholders. Calculating the last year's worth of payments shows that National Shipping Company of Saudi Arabia has a trailing yield of 2.1% on the current share price of ر.س26.40. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for National Shipping Company of Saudi Arabia

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. National Shipping Company of Saudi Arabia paid out a comfortable 26% of its profit last year. A useful secondary check can be to evaluate whether National Shipping Company of Saudi Arabia generated enough free cash flow to afford its dividend. It paid out 13% of its free cash flow as dividends last year, which is conservatively low.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit National Shipping Company of Saudi Arabia 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see National Shipping Company of Saudi Arabia has grown its earnings rapidly, up 27% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. National Shipping Company of Saudi Arabia's dividend payments are broadly unchanged compared to where they were 10 years ago.

Final Takeaway

Is National Shipping Company of Saudi Arabia worth buying for its dividend? National Shipping Company of Saudi Arabia has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. National Shipping Company of Saudi Arabia looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while National Shipping Company of Saudi Arabia has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with National Shipping Company of Saudi Arabia and understanding them should be part of your investment process.

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.