Al-Jouf Agricultural Development Co. (TADAWUL:6070) Goes Ex-Dividend Soon

Al-Jouf Agricultural Development Co. (TADAWUL:6070) stock is about to trade ex-dividend in 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Thus, you can purchase Al-Jouf Agricultural Development's shares before the 16th of April in order to receive the dividend, which the company will pay on the 1st of January.

The company's next dividend payment will be ر.س0.50 per share, on the back of last year when the company paid a total of ر.س1.00 to shareholders. Based on the last year's worth of payments, Al-Jouf Agricultural Development stock has a trailing yield of around 2.2% on the current share price of ر.س46.25. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Al-Jouf Agricultural Development can afford its dividend, and if the dividend could grow.

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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. Al-Jouf Agricultural Development paid out a comfortable 40% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The company paid out 96% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

While Al-Jouf Agricultural Development's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Al-Jouf Agricultural Development's ability to maintain its dividend.

Check out our latest analysis for Al-Jouf Agricultural Development

Click here to see how much of its profit Al-Jouf Agricultural Development 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Al-Jouf Agricultural Development has grown its earnings rapidly, up 52% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Al-Jouf Agricultural Development's dividend payments are broadly unchanged compared to where they were 10 years ago.

Final Takeaway

Is Al-Jouf Agricultural Development worth buying for its dividend? We like that Al-Jouf Agricultural Development has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

While it's tempting to invest in Al-Jouf Agricultural Development for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 1 warning sign for Al-Jouf Agricultural Development and you should be aware of it before buying any shares.

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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.