Modern Mills Company (TADAWUL:2284) Looks Interesting, And It's About To Pay A Dividend

It looks like Modern Mills Company (TADAWUL:2284) is about to go ex-dividend in the next couple of days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Thus, you can purchase Modern Mills' shares before the 5th of August in order to receive the dividend, which the company will pay on the 14th of August.

The company's next dividend payment will be ر.س1.00 per share. If you buy this business for its dividend, you should have an idea of whether Modern Mills's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Modern Mills

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 Modern Mills paying out a modest 40% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (66%) of its free cash flow in the past year, which is within an average range 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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why we're optimistic about Modern Mills's earnings, which have ripped higher, up 21% over the past year. While we'd be remiss not to point out that a year is a very short time in dividend investing, it's an encouraging sign so far.

One year is a very short time frame in the pantheon of investing, so we wouldn't get too hung up on these numbers.

This is Modern Mills's first year of paying a regular dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

To Sum It Up

Should investors buy Modern Mills for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Modern Mills paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Modern Mills is facing. Be aware that Modern Mills is showing 3 warning signs in our investment analysis, and 1 of those is significant...

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.

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