Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Derayah Financial Company (TADAWUL:4084) is about to trade ex-dividend in the next 3 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Derayah Financial's shares on or after the 17th of November will not receive the dividend, which will be paid on the 25th of November.
The company's upcoming dividend is ر.س0.33 a share, following on from the last 12 months, when the company distributed a total of ر.س1.32 per share to shareholders. Looking at the last 12 months of distributions, Derayah Financial has a trailing yield of approximately 6.4% on its current stock price of ر.س20.61. 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. Derayah Financial paid out just 21% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
View our latest analysis for Derayah Financial
Click here to see how much of its profit Derayah Financial paid out over the last 12 months.
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. It's encouraging to see Derayah Financial has grown its earnings rapidly, up 31% a year for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Derayah Financial has delivered an average of 0.8% per year annual increase in its dividend, based on the past two years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Derayah Financial is keeping back more of its profits to grow the business.
Final Takeaway
Is Derayah Financial worth buying for its dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, Derayah Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
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.
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