We Wouldn't Be Too Quick To Buy Jamjoom Pharmaceuticals Factory Company (TADAWUL:4015) Before It Goes Ex-Dividend

It looks like Jamjoom Pharmaceuticals Factory Company (TADAWUL:4015) is about to go ex-dividend in the next couple of days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a 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. Accordingly, Jamjoom Pharmaceuticals Factory investors that purchase the stock on or after the 29th of July will not receive the dividend, which will be paid on the 10th of August.

The company's upcoming dividend is ر.س2.00 a share, following on from the last 12 months, when the company distributed a total of ر.س3.06 per share to shareholders. Looking at the last 12 months of distributions, Jamjoom Pharmaceuticals Factory has a trailing yield of approximately 1.7% on its current stock price of ر.س176.70. 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! As a result, readers should always check whether Jamjoom Pharmaceuticals Factory has been able to grow its dividends, or if the dividend might be cut.

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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. Jamjoom Pharmaceuticals Factory is paying out an acceptable 52% of its profit, a common payout level among most companies. 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. Over the past year it paid out 124% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Jamjoom Pharmaceuticals Factory paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Jamjoom Pharmaceuticals Factory's ability to maintain its dividend.

Check out our latest analysis for Jamjoom Pharmaceuticals Factory

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see Jamjoom Pharmaceuticals Factory's earnings per share have dropped 18% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, two years ago, Jamjoom Pharmaceuticals Factory has lifted its dividend by approximately 24% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

Final Takeaway

Is Jamjoom Pharmaceuticals Factory worth buying for its dividend? It's definitely not great to see earnings per share shrinking. The company paid out an acceptable percentage of its income, but an uncomfortably high percentage of its cash flow over the past year. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Jamjoom Pharmaceuticals Factory.

Wondering what the future holds for Jamjoom Pharmaceuticals Factory? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.