Do these 3 checks before buying National Company for Learning and Education (TADAWUL: 4291) for its next dividend
National Company for Learning and Education (TADAWUL: 4291) is set to trade ex-dividend within the next three days. The ex-dividend date occurs one day before the record date, which is the day on which shareholders must be on the books of the company to receive a dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. This means that you will have to buy shares of National Company for Learning and Education by January 10 to receive the dividend, which will be paid on January 24.
The company’s upcoming dividend is 0.80 per share, continuing the past 12 months when the company has distributed a total of 0.80 per share to shareholders. Last year’s total dividend payouts show that the National Company for Learning and Education has a 1.3% return on the current SAR61.6 share price. If you are buying this company for its dividend, you should know if the National Company for Learning and Education dividend is reliable and sustainable. So we need to determine whether the National Company for Learning and Education can afford its dividend and whether the dividend could increase.
Check out our latest analysis for National Company for Learning and Education
If a company pays more dividends than it has earned, then the dividend can become unsustainable – which is not an ideal situation. The National Company for Learning and Education has paid out 141% of the profits in the past year, which in our opinion is generally not sustainable, unless there are mitigating features such as a unusually high cash flow or a large cash balance. Yet cash flow is usually more important than earnings in assessing dividend sustainability, so we always need to check whether the company has generated enough cash to pay its dividend. Fortunately, its dividend payments only took 45% of the free cash flow it generated, which is a comfortable payout ratio.
It’s good to see that while the dividends from the National Company for Learning and Education weren’t covered by earnings, they are at least affordable from a cash flow standpoint. Yet if the company repeatedly paid more than its earnings, we would be concerned. Extraordinarily few companies are able to persistently pay out a dividend in excess of their profits.
Click here to view the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have profits and dividends increased?
Companies with declining profits are tricky from a dividend standpoint. If profits fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. Readers will then understand why we are concerned that the National Company for Learning and Education’s earnings per share have fallen 24% per year over the past five years. Ultimately, when earnings per share declines, the size of the pie from which dividends can be paid declines.
Many investors will assess a company’s dividend performance by evaluating how much dividend payments have changed over time. Since our data began three years ago, the National Company for Learning and Education has increased its dividend by around 26% per year on average. The only way to pay higher dividends when profits go down is to pay a higher percentage of profits, spend money on the balance sheet, or borrow money. The National Company for Learning and Education is already paying 141% of its profits, and with declining profits, we think this dividend is unlikely to grow quickly in the future.
To sum up
Does the National Company for Learning and Education have what it takes to maintain its dividend payments? It is not a good combination to see a company with declining profits and pay 141% of its profits, which could imply that the dividend may be reduced in the future. Still, the cash flow was much stronger, which makes us wonder if there are any significant timing issues in the National Company for Learning and Education’s cash flow, or maybe the company has. aggressively depreciated certain assets, reducing its income. With the way it looks from a dividend standpoint, we’d be inclined to avoid the National Company for Learning and Education.
With that in mind, if you don’t mind the weak dividend characteristics of the National Company for Learning and Education, it is worth being aware of the risks involved in this business. To help you, we have discovered 1 warning sign for the National Society for Learning and Education which you should know before investing in their stocks.
However, we don’t recommend simply buying the first dividend stock you see. Here is a list of interesting dividend paying stocks with a yield above 2% and a dividend coming soon.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.