Arabian United Float Glass Company (TADAWUL:9611) stock is about to trade ex-dividend in 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, Arabian United Float Glass investors that purchase the stock on or after the 31st of May will not receive the dividend, which will be paid on the 1st of January.

The company's upcoming dividend is ر.س1.50 a share, following on from the last 12 months, when the company distributed a total of ر.س1.50 per share to shareholders. Calculating the last year's worth of payments shows that Arabian United Float Glass has a trailing yield of 4.6% on the current share price of ر.س32.90. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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. Arabian United Float Glass paid out more than half (50%) of its earnings last year, which is a regular payout ratio for most companies. 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. Thankfully its dividend payments took up just 43% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Arabian United Float Glass'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 how much of its profit Arabian United Float Glass paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Arabian United Float Glass's earnings per share have fallen at approximately 13% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Given that Arabian United Float Glass has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

From a dividend perspective, should investors buy or avoid Arabian United Float Glass? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

If you're not too concerned about Arabian United Float Glass's ability to pay dividends, you should still be mindful of some of the other risks that this business faces.

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.

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.