Don't Race Out To Buy Sustained Infrastructure Holding Company (TADAWUL:2190) Just Because It's Going Ex-Dividend

Sustained Infrastructure Holding Company (TADAWUL:2190) is about to trade 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. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Sustained Infrastructure Holding's shares before the 30th of June in order to receive the dividend, which the company will pay on the 20th of July.

The company's next dividend payment will be ر.س0.80 per share, on the back of last year when the company paid a total of ر.س0.80 to shareholders. Based on the last year's worth of payments, Sustained Infrastructure Holding has a trailing yield of 2.6% on the current stock price of ر.س30.55. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Sustained Infrastructure Holding can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Sustained Infrastructure Holding's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. A useful secondary check can be to evaluate whether Sustained Infrastructure Holding generated enough free cash flow to afford its dividend. It distributed 34% of its free cash flow as dividends, a comfortable payout level for most companies.

Check out our latest analysis for Sustained Infrastructure Holding

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Sustained Infrastructure Holding's earnings are down 2.3% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Sustained Infrastructure Holding has increased its dividend at approximately 6.7% a year on average.

Final Takeaway

Should investors buy Sustained Infrastructure Holding for the upcoming dividend? It's never great to see earnings per share declining, especially when a company is paying out -246% of its profit as dividends, which we feel is uncomfortably high. Yet cashflow was much stronger, which makes us wonder if there are some large timing issues in Sustained Infrastructure Holding's cash flows, or perhaps the company has written down some assets aggressively, reducing its income. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

With that being said, if you're still considering Sustained Infrastructure Holding as an investment, you'll find it beneficial to know what risks this stock is facing. In terms of investment risks, we've identified 2 warning signs with Sustained Infrastructure Holding 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.