Only Three Days Left To Cash In On Dallah Healthcare's (TADAWUL:4004) Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Dallah Healthcare Company (TADAWUL:4004) 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Dallah Healthcare's shares on or after the 17th of January, you won't be eligible to receive the dividend, when it is paid on the 30th of January.

The company's upcoming dividend is ر.س0.50 a share, following on from the last 12 months, when the company distributed a total of ر.س2.00 per share to shareholders. Last year's total dividend payments show that Dallah Healthcare has a trailing yield of 1.1% on the current share price of SAR174. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Dallah Healthcare has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Dallah Healthcare

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Dallah Healthcare paying out a modest 44% 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 80% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's positive to see that Dallah Healthcare's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Dallah Healthcare's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. A high payout ratio of 44% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Dallah Healthcare could be signalling that its future growth prospects are thin.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Dallah Healthcare has lifted its dividend by approximately 9.8% a year on average.

The Bottom Line

Has Dallah Healthcare got what it takes to maintain its dividend payments? Earnings per share have been flat over the 10-year timeframe we consider, and Dallah Healthcare paid out less than half its earnings and more than half its free cashflow over the last year. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Dallah Healthcare's dividend merits.

In light of that, while Dallah Healthcare has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Dallah Healthcare and you should be aware of these before buying any shares.

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.