Riyadh Cement Company (TADAWUL:3092) Will Pay A ر.س1.00 Dividend In Three Days

Riyadh Cement Company (TADAWUL:3092) stock is about to trade ex-dividend in three 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. 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. Meaning, you will need to purchase Riyadh Cement's shares before the 19th of August to receive the dividend, which will be paid on the 28th of August.

The company's next dividend payment will be ر.س1.00 per share. Last year, in total, the company distributed ر.س1.55 to shareholders. Last year's total dividend payments show that Riyadh Cement has a trailing yield of 6.0% on the current share price of ر.س25.90. If you buy this business for its dividend, you should have an idea of whether Riyadh Cement's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Riyadh Cement

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, Riyadh Cement paid out 100% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. A useful secondary check can be to evaluate whether Riyadh Cement generated enough free cash flow to afford its dividend. Over the last year it paid out 74% of its free cash flow as dividends, within the usual range for most companies.

It's good to see that while Riyadh Cement's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. 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 fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Riyadh Cement's earnings have been skyrocketing, up 23% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Riyadh Cement has seen its dividend decline 4.0% per annum on average over the past three years, which is not great to see. Riyadh Cement is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Should investors buy Riyadh Cement for the upcoming dividend? Riyadh Cement has been growing its earnings per share nicely, although judging by the difference between its profit and cashflow payout ratios, the company might have reported some write-offs over the last year. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you want to look further into Riyadh Cement, it's worth knowing the risks this business faces. In terms of investment risks, we've identified 1 warning sign with Riyadh Cement and understanding them should be part of your investment process.

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.