Derayah Financial Company (TADAWUL:4084) stock is about to trade ex-dividend in three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase Derayah Financial's shares on or after the 12th of August, you won't be eligible to receive the dividend, when it is paid on the 20th of August.

The company's next dividend payment will be ر.س0.33 per share, on the back of last year when the company paid a total of ر.س1.32 to shareholders. Last year's total dividend payments show that Derayah Financial has a trailing yield of 6.3% on the current share price of ر.س20.88. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Derayah Financial 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. Its dividend payout ratio is 82% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

Click here to see how much of its profit Derayah Financial paid out over the last 12 months.

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. That's why it's comforting to see Derayah Financial's earnings have been skyrocketing, up 31% per annum for the past five years.

Unfortunately Derayah Financial has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Has Derayah Financial got what it takes to maintain its dividend payments? Derayah Financial has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Derayah Financial ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

Curious about whether Derayah Financial has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

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.