Readers hoping to buy Mobile Telecommunications Company Saudi Arabia (TADAWUL:7030) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. 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 Mobile Telecommunications Company Saudi Arabia's shares before the 1st of July in order to be eligible for the dividend, which will be paid on the 21st of July.

The company's upcoming dividend is ر.س0.50 a share, following on from the last 12 months, when the company distributed a total of ر.س0.50 per share to shareholders. Calculating the last year's worth of payments shows that Mobile Telecommunications Company Saudi Arabia has a trailing yield of 4.7% on the current share price of ر.س10.60. If you buy this business for its dividend, you should have an idea of whether Mobile Telecommunications Company Saudi Arabia's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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. Mobile Telecommunications Company Saudi Arabia is paying out an acceptable 63% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Mobile Telecommunications Company Saudi Arabia generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 36% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Mobile Telecommunications Company Saudi Arabia'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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Mobile Telecommunications Company Saudi Arabia's earnings per share have risen 16% per annum over the last five years. Mobile Telecommunications Company Saudi Arabia is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Mobile Telecommunications Company Saudi Arabia's dividend payments are broadly unchanged compared to where they were three years ago.

Final Takeaway

Should investors buy Mobile Telecommunications Company Saudi Arabia for the upcoming dividend? We like Mobile Telecommunications Company Saudi Arabia's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Mobile Telecommunications Company Saudi Arabia is facing.

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