Should Income Investors Look At National Gas and Industrialization Company (TADAWUL:2080) Before Its Ex-Dividend?

Readers hoping to buy National Gas and Industrialization Company (TADAWUL:2080) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, National Gas and Industrialization investors that purchase the stock on or after the 16th of January will not receive the dividend, which will be paid on the 29th of January.

The company's next dividend payment will be ر.س1.10 per share, and in the last 12 months, the company paid a total of ر.س2.20 per share. Calculating the last year's worth of payments shows that National Gas and Industrialization has a trailing yield of 2.1% on the current share price of ر.س103.00. If you buy this business for its dividend, you should have an idea of whether National Gas and Industrialization's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for National Gas and Industrialization

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. National Gas and Industrialization paid out more than half (68%) of its earnings last year, which is a regular payout ratio for most companies. 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 dividends equivalent to 373% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how National Gas and Industrialization intends to continue funding this dividend, or if it could be forced to cut the payment.

While National Gas and Industrialization's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to National Gas and Industrialization's ability to maintain its dividend.

Click here to see how much of its profit National Gas and Industrialization paid out over the last 12 months.

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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see National Gas and Industrialization has grown its earnings rapidly, up 21% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. It looks like the National Gas and Industrialization dividends are largely the same as they were 10 years ago.

Final Takeaway

Should investors buy National Gas and Industrialization for the upcoming dividend? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 373% of its cashflow, which is uncomfortably high. In summary, while it has some positive characteristics, we're not inclined to race out and buy National Gas and Industrialization today.

With that being said, if dividends aren't your biggest concern with National Gas and Industrialization, you should know about the other risks facing this business. For example - National Gas and Industrialization has 1 warning sign we think you should be aware of.

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.