Is It Worth Considering The Power and Water Utility Company for Jubail and Yanbu (TADAWUL:2083) For Its Upcoming Dividend?

Readers hoping to buy The Power and Water Utility Company for Jubail and Yanbu (TADAWUL:2083) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. In other words, investors can purchase Power and Water Utility Company for Jubail and Yanbu's shares before the 20th of August in order to be eligible for the dividend, which will be paid on the 5th of September.

The company's next dividend payment will be ر.س0.35 per share, on the back of last year when the company paid a total of ر.س0.70 to shareholders. Calculating the last year's worth of payments shows that Power and Water Utility Company for Jubail and Yanbu has a trailing yield of 1.2% on the current share price of ر.س57.80. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Power and Water Utility Company for Jubail and Yanbu

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Power and Water Utility Company for Jubail and Yanbu paid out more than half (75%) 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. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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.

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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Power and Water Utility Company for Jubail and Yanbu's earnings per share have been growing at 13% a year for the past five years. Power and Water Utility Company for Jubail and Yanbu has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Given that Power and Water Utility Company for Jubail and Yanbu has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Should investors buy Power and Water Utility Company for Jubail and Yanbu for the upcoming dividend? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. However, we'd also note that Power and Water Utility Company for Jubail and Yanbu is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

On that note, you'll want to research what risks Power and Water Utility Company for Jubail and Yanbu is facing. Every company has risks, and we've spotted 2 warning signs for Power and Water Utility Company for Jubail and Yanbu (of which 1 is concerning!) you should know about.

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.