Dividend Investors: Don't Be Too Quick To Buy SAL Saudi Logistics Services Company (TADAWUL:4263) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see SAL Saudi Logistics Services Company (TADAWUL:4263) is about to trade ex-dividend in the next 3 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. In other words, investors can purchase SAL Saudi Logistics Services' shares before the 17th of November in order to be eligible for the dividend, which will be paid on the 1st of December.

The company's next dividend payment will be ر.س1.70 per share. Last year, in total, the company distributed ر.س5.32 to shareholders. Last year's total dividend payments show that SAL Saudi Logistics Services has a trailing yield of 3.1% on the current share price of ر.س172.10. If you buy this business for its dividend, you should have an idea of whether SAL Saudi Logistics Services's dividend is reliable and sustainable. As a result, readers should always check whether SAL Saudi Logistics Services 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. SAL Saudi Logistics Services paid out more than half (75%) of its earnings last year, which is a regular payout ratio for 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. It paid out more than half (61%) of its free cash flow in the past year, which is within an average range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

See our latest analysis for SAL Saudi Logistics 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 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. SAL Saudi Logistics Services's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 71% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past two years, SAL Saudi Logistics Services has increased its dividend at approximately 88% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

The Bottom Line

From a dividend perspective, should investors buy or avoid SAL Saudi Logistics Services? While earnings per share are shrinking, it's encouraging to see that at least SAL Saudi Logistics Services's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of SAL Saudi Logistics Services.

With that being said, if you're still considering SAL Saudi Logistics Services as an investment, you'll find it beneficial to know what risks this stock is facing. Our analysis shows 1 warning sign for SAL Saudi Logistics Services and you should be aware of this before buying any shares.

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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.