Don't Race Out To Buy Al Masane Al Kobra Mining Company (TADAWUL:1322) Just Because It's Going Ex-Dividend

Al Masane Al Kobra Mining Company (TADAWUL:1322) is about to trade ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Al Masane Al Kobra Mining investors that purchase the stock on or after the 11th of March will not receive the dividend, which will be paid on the 23rd of March.

The company's upcoming dividend is ر.س1.18 a share, following on from the last 12 months, when the company distributed a total of ر.س1.55 per share to shareholders. Looking at the last 12 months of distributions, Al Masane Al Kobra Mining has a trailing yield of approximately 2.8% on its current stock price of ر.س56.00. 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 Masane Al Kobra Mining can afford its dividend, and if the dividend could grow.

View our latest analysis for Al Masane Al Kobra Mining

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. It paid out 81% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings.

Click here to see how much of its profit Al Masane Al Kobra Mining paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're discomforted by Al Masane Al Kobra Mining's 9.1% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Al Masane Al Kobra Mining has seen its dividend decline 19% per annum on average over the past three years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

Should investors buy Al Masane Al Kobra Mining for the upcoming dividend? We're not overly enthused to see Al Masane Al Kobra Mining's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. It doesn't appear an outstanding opportunity, but could be worth a closer look.

With that being said, if dividends aren't your biggest concern with Al Masane Al Kobra Mining, you should know about the other risks facing this business. For example - Al Masane Al Kobra Mining has 1 warning sign we think you should be aware of.

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.