United International Transportation Company (TADAWUL:4260) Goes Ex-Dividend Soon
Readers hoping to buy United International Transportation Company (TADAWUL:4260) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. In other words, investors can purchase United International Transportation's shares before the 16th of August in order to be eligible for the dividend, which will be paid on the 1st of September.
The company's next dividend payment will be ر.س0.50 per share. Last year, in total, the company distributed ر.س1.25 to shareholders. Looking at the last 12 months of distributions, United International Transportation has a trailing yield of approximately 4.3% on its current stock price of ر.س28.88. If you buy this business for its dividend, you should have an idea of whether United International Transportation's dividend is reliable and sustainable. As a result, readers should always check whether United International Transportation has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately United International Transportation's payout ratio is modest, at just 30% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 67% of its free cash flow as dividends, within the usual range for most companies.
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 United International Transportation
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see United International Transportation earnings per share are up 6.5% per annum over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, United International Transportation has lifted its dividend by approximately 4.5% 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
From a dividend perspective, should investors buy or avoid United International Transportation? Earnings per share growth has been modest, and it's interesting that United International Transportation is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
So while United International Transportation looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for United International Transportation (of which 1 is a bit unpleasant!) you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.