It looks like Abdulaziz and Mansour Ibrahim Albabtin Co. (TADAWUL:9549) is about to go ex-dividend in the next 4 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 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. Thus, you can purchase Abdulaziz and Mansour Ibrahim Albabtin's shares before the 28th of June in order to receive the dividend, which the company will pay on the 14th of July.

The company's next dividend payment will be ر.س0.50 per share, on the back of last year when the company paid a total of ر.س0.50 to shareholders. Looking at the last 12 months of distributions, Abdulaziz and Mansour Ibrahim Albabtin has a trailing yield of approximately 2.2% on its current stock price of ر.س22.95. If you buy this business for its dividend, you should have an idea of whether Abdulaziz and Mansour Ibrahim Albabtin's dividend is reliable and sustainable. As a result, readers should always check whether Abdulaziz and Mansour Ibrahim Albabtin has been able to grow its dividends, or if the dividend might be cut.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Abdulaziz and Mansour Ibrahim Albabtin's payout ratio is modest, at just 25% of profit. A useful secondary check can be to evaluate whether Abdulaziz and Mansour Ibrahim Albabtin generated enough free cash flow to afford its dividend. Abdulaziz and Mansour Ibrahim Albabtin paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.

Click here to see how much of its profit Abdulaziz and Mansour Ibrahim Albabtin paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that Abdulaziz and Mansour Ibrahim Albabtin's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Abdulaziz and Mansour Ibrahim Albabtin's dividend payments per share have declined at 21% per year on average over the past three years, which is uninspiring.

Final Takeaway

From a dividend perspective, should investors buy or avoid Abdulaziz and Mansour Ibrahim Albabtin? It's disappointing to see earnings per share have fallen slightly, even though Abdulaziz and Mansour Ibrahim Albabtin is paying out less than half its income as dividends. It's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. Overall it doesn't look like the most suitable dividend stock for a long-term buy and hold investor.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Abdulaziz and Mansour Ibrahim Albabtin. We've identified 2 warning signs with Abdulaziz and Mansour Ibrahim Albabtin (at least 1 which is concerning), and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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.