Just Three Days Till Saudi Aramco Base Oil Company - Luberef (TADAWUL:2223) Will Be Trading Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Saudi Aramco Base Oil Company - Luberef (TADAWUL:2223) is about to go ex-dividend in just 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Saudi Aramco Base Oil Company - Luberef's shares before the 2nd of October in order to be eligible for the dividend, which will be paid on the 15th of October.

The company's next dividend payment will be ر.س3.60 per share, on the back of last year when the company paid a total of ر.س7.20 to shareholders. Based on the last year's worth of payments, Saudi Aramco Base Oil Company - Luberef has a trailing yield of 5.5% on the current stock price of ر.س131.80. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Saudi Aramco Base Oil Company - Luberef can afford its dividend, and if the dividend could grow.

See our latest analysis for Saudi Aramco Base Oil Company - Luberef

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. Saudi Aramco Base Oil Company - Luberef paid out 126% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 89% 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 good to see that while Saudi Aramco Base Oil Company - Luberef's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

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

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Saudi Aramco Base Oil Company - Luberef's earnings have been skyrocketing, up 142% per annum for the past five years.

Unfortunately Saudi Aramco Base Oil Company - Luberef has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Final Takeaway

Is Saudi Aramco Base Oil Company - Luberef an attractive dividend stock, or better left on the shelf? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. Overall, it's hard to get excited about Saudi Aramco Base Oil Company - Luberef from a dividend perspective.

If you're not too concerned about Saudi Aramco Base Oil Company - Luberef's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example - Saudi Aramco Base Oil Company - Luberef has 2 warning signs we think you should be aware of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.