Why It Might Not Make Sense To Buy Aljazira Takaful Taawuni Company (TADAWUL:8012) For Its Upcoming Dividend

Aljazira Takaful Taawuni Company (TADAWUL:8012) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Aljazira Takaful Taawuni's shares before the 17th of June in order to be eligible for the dividend, which will be paid on the 6th of July.

The company's next dividend payment will be ر.س0.30 per share. Last year, in total, the company distributed ر.س0.30 to shareholders. Based on the last year's worth of payments, Aljazira Takaful Taawuni has a trailing yield of 2.3% on the current stock price of ر.س13.02. 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.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Aljazira Takaful Taawuni paid out 55% of its earnings to investors last year, a normal payout level for most businesses.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Check out our latest analysis for Aljazira Takaful Taawuni

Click here to see how much of its profit Aljazira Takaful Taawuni paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Aljazira Takaful Taawuni's earnings per share have dropped 5.5% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Aljazira Takaful Taawuni has seen its dividend decline 1.9% per annum on average over the past nine years, which is not great to see.

The Bottom Line

Is Aljazira Takaful Taawuni an attractive dividend stock, or better left on the shelf? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Aljazira Takaful Taawuni. Every company has risks, and we've spotted 1 warning sign for Aljazira Takaful Taawuni you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.