Munawla Cargo Co. Ltd. (TADAWUL:9571) Looks Interesting, And It's About To Pay A Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Munawla Cargo Co. Ltd. (TADAWUL:9571) is about to go ex-dividend in just 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Munawla Cargo's shares on or after the 6th of September, you won't be eligible to receive the dividend, when it is paid on the 16th of September.
The company's next dividend payment will be ر.س0.70 per share, and in the last 12 months, the company paid a total of ر.س0.50 per share. Based on the last year's worth of payments, Munawla Cargo stock has a trailing yield of around 2.8% on the current share price of ر.س17.99. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Its dividend payout ratio is 80% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 12% of its cash flow last 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.
Check out our latest analysis for Munawla Cargo
Click here to see how much of its profit Munawla Cargo 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. 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 Munawla Cargo earnings per share are up 8.5% per annum over the last five years. Decent historical earnings per share growth suggests Munawla Cargo has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Munawla Cargo's dividend payments are effectively flat on where they were two years ago.
Final Takeaway
Should investors buy Munawla Cargo for the upcoming dividend? Earnings per share growth has been modest and Munawla Cargo paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. Overall, it's hard to get excited about Munawla Cargo from a dividend perspective.
In light of that, while Munawla Cargo has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Munawla Cargo is showing 2 warning signs in our investment analysis, and 1 of those is a bit unpleasant...
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.