Al-Modawat Specialized Medical Company (TADAWUL:9594) stock is about to trade ex-dividend in three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Al-Modawat Specialized Medical's shares before the 17th of August to receive the dividend, which will be paid on the 1st of September.

The company's next dividend payment will be ر.س0.02 per share. Last year, in total, the company distributed ر.س0.12 to shareholders. Looking at the last 12 months of distributions, Al-Modawat Specialized Medical has a trailing yield of approximately 2.1% on its current stock price of ر.س5.59. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Al-Modawat Specialized Medical has been able to grow its dividends, or if the dividend might be cut.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Al-Modawat Specialized Medical paid out a comfortable 38% of its profit last year. 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. Al-Modawat Specialized Medical paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see how much of its profit Al-Modawat Specialized Medical paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Al-Modawat Specialized Medical, with earnings per share up 8.3% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Al-Modawat Specialized Medical has seen its dividend decline 28% per annum on average over the past two years, which is not great to see. Al-Modawat Specialized Medical is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Has Al-Modawat Specialized Medical got what it takes to maintain its dividend payments? Al-Modawat Specialized Medical delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and -1,368% of its cash flow over the last year, which is a mediocre outcome. Overall, it's hard to get excited about Al-Modawat Specialized Medical from a dividend perspective.

If you're not too concerned about Al-Modawat Specialized Medical's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. In terms of investment risks, we've identified 1 warning sign with Al-Modawat Specialized Medical 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.