Readers hoping to buy Jarir Marketing Company (TADAWUL:4190) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Jarir Marketing's shares before the 18th of August in order to receive the dividend, which the company will pay on the 26th of August.

The company's upcoming dividend is ر.س0.20 a share, following on from the last 12 months, when the company distributed a total of ر.س0.89 per share to shareholders. Based on the last year's worth of payments, Jarir Marketing has a trailing yield of 5.2% on the current stock price of ر.س17.18. If you buy this business for its dividend, you should have an idea of whether Jarir Marketing's dividend is reliable and sustainable. So we need to investigate whether Jarir Marketing can afford its dividend, and if the dividend could grow.

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. Jarir Marketing paid out 58% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Jarir Marketing generated enough free cash flow to afford its dividend. Dividends consumed 69% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. With that in mind, we're encouraged by the steady growth at Jarir Marketing, with earnings per share up 2.3% on average over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last nine years, Jarir Marketing has lifted its dividend by approximately 5.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Should investors buy Jarir Marketing for the upcoming dividend? Earnings per share have been growing modestly and Jarir Marketing paid out a bit over half of its earnings and free cash flow last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

Curious what other investors think of Jarir Marketing? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

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.