Saudi Networkers Services Company (TADAWUL:9543) Stock Goes Ex-Dividend In Just Two Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Saudi Networkers Services Company (TADAWUL:9543) is about to trade ex-dividend in the next two 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. 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. Therefore, if you purchase Saudi Networkers Services' shares on or after the 14th of September, you won't be eligible to receive the dividend, when it is paid on the 25th of September.

The company's next dividend payment will be ر.س2.00 per share, on the back of last year when the company paid a total of ر.س4.35 to shareholders. Based on the last year's worth of payments, Saudi Networkers Services stock has a trailing yield of around 5.7% on the current share price of ر.س75.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Saudi Networkers Services has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Saudi Networkers Services's payout ratio is modest, at just 39% of profit. 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. Dividends consumed 70% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Saudi Networkers 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.

Check out our latest analysis for Saudi Networkers Services

Click here to see how much of its profit Saudi Networkers Services paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Saudi Networkers Services's earnings per share have plummeted approximately 48% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Saudi Networkers Services has delivered an average of 8.6% per year annual increase in its dividend, based on the past three years of dividend payments.

The Bottom Line

Has Saudi Networkers Services got what it takes to maintain its dividend payments? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Saudi Networkers Services's dividend merits.

Curious about whether Saudi Networkers Services has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

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.