Be Sure To Check Out Balady Poultry Company (TADAWUL:9559) Before It Goes Ex-Dividend

Balady Poultry Company (TADAWUL:9559) 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Balady Poultry's shares on or after the 3rd of December, you won't be eligible to receive the dividend, when it is paid on the 10th of December.

The upcoming dividend for Balady Poultry is ر.س1.00 per share. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Balady Poultry

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Balady Poultry is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Balady Poultry generated enough free cash flow to afford its dividend. It distributed 32% 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 how much of its profit Balady Poultry paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For that reason, it's encouraging to see Balady Poultry's earnings over the past year have risen 87%. 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. 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.

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

Final Takeaway

Has Balady Poultry got what it takes to maintain its dividend payments? Balady Poultry has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

So while Balady Poultry looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. We've identified 2 warning signs with Balady Poultry (at least 1 which shouldn't be ignored), and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.