Here's What We Like About Aldrees Petroleum and Transport Services' (TADAWUL:4200) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Aldrees Petroleum and Transport Services Company (TADAWUL:4200) 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Aldrees Petroleum and Transport Services' shares on or after the 2nd of May will not receive the dividend, which will be paid on the 15th of May.

The company's next dividend payment will be ر.س2.00 per share. Last year, in total, the company distributed ر.س2.00 to shareholders. Looking at the last 12 months of distributions, Aldrees Petroleum and Transport Services has a trailing yield of approximately 2.0% on its current stock price of SAR100.2. 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.

Check out our latest analysis for Aldrees Petroleum and Transport Services

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Aldrees Petroleum and Transport Services paid out more than half (62%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.

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 the company's payout ratio, plus analyst estimates of its future dividends.

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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see Aldrees Petroleum and Transport Services has grown its earnings rapidly, up 30% a year for the past five years. The current payout ratio suggests a good balance between rewarding shareholders with dividends, and reinvesting in growth. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Aldrees Petroleum and Transport Services could have strong prospects for future increases to the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Aldrees Petroleum and Transport Services has delivered an average of 9.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Aldrees Petroleum and Transport Services an attractive dividend stock, or better left on the shelf? Aldrees Petroleum and Transport Services's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 1 warning sign for Aldrees Petroleum and Transport Services 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.