There's A Lot To Like About Arabian Internet and Communication Services' (TADAWUL:7202) Upcoming ر.س10.00 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 Arabian Internet and Communication Services Company (TADAWUL:7202) is about to go ex-dividend in just 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase Arabian Internet and Communication Services' shares on or after the 7th of May will not receive the dividend, which will be paid on the 1st of January.

The company's next dividend payment will be ر.س10.00 per share. Last year, in total, the company distributed ر.س8.00 to shareholders. Based on the last year's worth of payments, Arabian Internet and Communication Services has a trailing yield of 2.8% on the current stock price of ر.س282.00. 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 Arabian Internet and Communication Services has been able to grow its dividends, or if the dividend might be cut.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Arabian Internet and Communication Services is paying out an acceptable 60% 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. Fortunately, it paid out only 31% of its free cash flow in the past year.

It's positive to see that Arabian Internet and Communication Services's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

See our latest analysis for Arabian Internet and Communication Services

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 Arabian Internet and Communication Services's earnings have been skyrocketing, up 33% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

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, three years ago, Arabian Internet and Communication Services has lifted its dividend by approximately 26% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Arabian Internet and Communication Services an attractive dividend stock, or better left on the shelf? Arabian Internet and Communication Services's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

Curious what other investors think of Arabian Internet and Communication Services? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.