Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see The National Shipping Company of Saudi Arabia (TADAWUL:4030) is about to trade ex-dividend in the next two 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 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 National Shipping Company of Saudi Arabia's shares on or after the 13th of September, you won't be eligible to receive the dividend, when it is paid on the 27th of September.
The company's next dividend payment will be ر.س1.50 per share, and in the last 12 months, the company paid a total of ر.س1.00 per share. Looking at the last 12 months of distributions, National Shipping Company of Saudi Arabia has a trailing yield of approximately 2.8% on its current stock price of ر.س36.18. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. National Shipping Company of Saudi Arabia is paying out just 14% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Fortunately, it paid out only 38% of its free cash flow in the past year.
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.
See our latest analysis for National Shipping Company of Saudi Arabia
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see National Shipping Company of Saudi Arabia's earnings have been skyrocketing, up 32% per annum for the past five years. National Shipping Company of Saudi Arabia is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, National Shipping Company of Saudi Arabia has lifted its dividend by approximately 8.9% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Is National Shipping Company of Saudi Arabia worth buying for its dividend? National Shipping Company of Saudi Arabia has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.
So while National Shipping Company of Saudi Arabia looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that National Shipping Company of Saudi Arabia is showing 2 warning signs in our investment analysis, and 1 of those is a bit unpleasant...
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.