Readers hoping to buy United International Transportation Company (TADAWUL:4260) as its dividend will have to make its way shortly as the stock is set to trade ex-dividend. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement that does not appear on the record date. So you can buy United International Transportation stock before May 18 to collect the dividend the company will pay on January 1.
The company’s next dividend payment will be £1.30 per share. Last year, in total, the company distributed ر.س.1.90 to shareholders. Based on last year’s payouts, United International Transportation has a 4.0% yield on the current share price of SAR 47.25. Dividends contribute greatly to investment returns for long-term holders, but only if the dividend continues to be paid. That’s why we always have to check if the dividend payouts seem sustainable and if the business is growing.
Check out our latest analysis for United International Transportation
Dividends are usually paid out of company profits, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. United International Transportation paid out more than half (61%) of its profits last year, which is a regular payout ratio for most companies. That said, even very profitable companies can sometimes not generate enough cash to pay the dividend, so we should always check if the dividend is covered by cash flow. In the past year, it has paid out 110% of its free cash flow as dividends, which is uncomfortably high. We’re curious why the company paid out more money than it generated last year, as this may be one of the first signs that a dividend may be unsustainable.
United International Transportation paid less dividends than it reported earnings, but unfortunately it did not generate enough cash to cover the dividend. If this happens repeatedly, it would pose a risk to United International Transportation’s ability to maintain its dividend.
Click here to see the company’s payout ratio, as well as analysts’ estimates of its future dividends.
Have earnings and dividends increased?
Companies with strong growth prospects are generally the best dividend payers because it is easier to increase dividends when earnings per share improve. Investors love dividends, so if earnings fall and the dividend is cut, expect a stock to sell heavily at the same time. With this in mind, we are encouraged by the steady growth of United International Transportation, with earnings per share up 5.3% on average over the past five years. Earnings have been growing at a steady pace, but we fear dividend payments have consumed the bulk of the company’s cash flow over the past year.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Over the past 10 years, United International Transportation has increased its dividend by about 13% per year on average. It’s encouraging to see the company increasing its dividends as earnings rise, suggesting at least some corporate interest in rewarding shareholders.
Should investors buy United International Transportation for the next dividend? United International Transportation pays a reasonable percentage of its revenue and an uncomfortably high 110% of its cash flow as dividends. At least earnings per share rose steadily. It’s not that we think United International Transportation is a bad company, but those characteristics don’t generally lead to outstanding dividend performance.
That being said, if you still consider United International Transportation as an investment, you will find it useful to know what risks this stock faces. Every business has risks, and we’ve spotted 2 warning signs for United International Transportation (of which 1 is significant!) that you should know.
If you are looking for good dividend payers, we recommend by consulting our selection of the best dividend-paying stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.