Is It Worth Considering SAL Saudi Logistics Services Company (TADAWUL:4263) For Its Upcoming Dividend?

It looks like SAL Saudi Logistics Services Company (TADAWUL:4263) is about to go ex-dividend in the next three days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Accordingly, SAL Saudi Logistics Services investors that purchase the stock on or after the 14th of August will not receive the dividend, which will be paid on the 1st of January.

The upcoming dividend for SAL Saudi Logistics Services will put a total of ر.س1.45 per share in shareholders' pockets. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether SAL Saudi Logistics Services can afford its dividend, and if the dividend could grow.

Check out our latest analysis for SAL Saudi Logistics Services

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately SAL Saudi Logistics Services's payout ratio is modest, at just 43% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out more than three-quarters (88%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that SAL Saudi Logistics 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.

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 fall far enough, the company could be forced to cut its dividend. SAL Saudi Logistics Services's earnings per share have plummeted approximately 71% a year over the previous five years.

This is SAL Saudi Logistics Services's first year of paying a regular dividend, which is exciting for shareholders - but it does mean there's no dividend history to examine.

Final Takeaway

Is SAL Saudi Logistics Services worth buying for its dividend? 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. In summary, while it has some positive characteristics, we're not inclined to race out and buy SAL Saudi Logistics Services today.

If you're not too concerned about SAL Saudi Logistics Services's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 1 warning sign for SAL Saudi Logistics Services that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.