Three Days Left Until Etihad Etisalat Company (TADAWUL:7020) Trades Ex-Dividend

It looks like Etihad Etisalat Company (TADAWUL:7020) is about to go ex-dividend in the next 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 Etihad Etisalat's shares on or after the 23rd of March will not receive the dividend, which will be paid on the 9th of April.

The company's next dividend payment will be ر.س1.30 per share. Last year, in total, the company distributed ر.س2.60 to shareholders. Looking at the last 12 months of distributions, Etihad Etisalat has a trailing yield of approximately 4.4% on its current stock price of ر.س59.40. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Etihad Etisalat

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. Etihad Etisalat paid out 98% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. 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. Fortunately, it paid out only 48% of its free cash flow in the past year.

It's good to see that while Etihad Etisalat's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. 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 Etihad Etisalat's earnings have been skyrocketing, up 151% 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. Etihad Etisalat has seen its dividend decline 6.3% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

Has Etihad Etisalat got what it takes to maintain its dividend payments? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Etihad Etisalat's paying out such a high percentage of its profit. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

In light of that, while Etihad Etisalat has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for Etihad Etisalat that you should be aware of before investing in their shares.

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.