Income Investors Should Know That Dubai Taxi Company P.J.S.C. (DFM:DTC) Goes Ex-Dividend Soon

It looks like Dubai Taxi Company P.J.S.C. (DFM:DTC) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Dubai Taxi Company P.J.S.C investors that purchase the stock on or after the 16th of April will not receive the dividend, which will be paid on the 28th of April.

The company’s upcoming dividend is د.إ0.0568 a share, following on from the last 12 months, when the company distributed a total of د.إ0.12 per share to shareholders. Last year’s total dividend payments show that Dubai Taxi Company P.J.S.C has a trailing yield of 5.6% on the current share price of د.إ2.18. We love seeing companies pay a dividend, but it’s also important to be sure that laying the golden eggs isn’t going to kill our golden goose! That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. It paid out 85% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We’d be concerned if earnings began to decline. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the past year it paid out 123% of its free cash flow as dividends, which is uncomfortably high. We’re curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

While Dubai Taxi Company P.J.S.C’s dividends were covered by the company’s reported profits, cash is somewhat more important, so it’s not great to see that the company didn’t generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Dubai Taxi Company P.J.S.C’s ability to maintain its dividend.

Check out our latest analysis for Dubai Taxi Company P.J.S.C

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we’re glad to see Dubai Taxi Company P.J.S.C’s earnings per share have risen 17% per annum over the last three years. Earnings have been growing at a decent rate, but we’re concerned dividend payments consumed most of the company’s cash flow over the past year.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Dubai Taxi Company P.J.S.C has delivered an average of 106% per year annual increase in its dividend, based on the past two years of dividend payments. It’s exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

From a dividend perspective, should investors buy or avoid Dubai Taxi Company P.J.S.C? It’s good to see that earnings per share are growing and that the company’s payout ratio is within a normal range for most businesses. However we’re somewhat concerned that it paid out 123% of its cashflow, which is uncomfortably high. Overall we’re not hugely bearish on the stock, but there are likely better dividend investments out there.

If you want to look further into Dubai Taxi Company P.J.S.C, it’s worth knowing the risks this business faces. Our analysis shows 2 warning signs for Dubai Taxi Company P.J.S.C and you should be aware of these before buying any shares.

Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s a curated list of interesting stocks that are strong dividend payers.

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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.