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 Delta Galil Industries Ltd. (TLV:DELG) is about to go ex-dividend in just three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. Accordingly, Delta Galil Industries investors that purchase the stock on or after the 12th of August will not receive the dividend, which will be paid on the 19th of August.
The company's upcoming dividend is US$0.305 a share, following on from the last 12 months, when the company distributed a total of US$1.30 per share to shareholders. Based on the last year's worth of payments, Delta Galil Industries has a trailing yield of 2.3% on the current stock price of ₪169.00. 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! So we need to investigate whether Delta Galil Industries can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Delta Galil Industries paid out a comfortable 34% of its profit last year. 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. Luckily it paid out just 18% of its free cash flow last year.
It's positive to see that Delta Galil Industries's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Check out our latest analysis for Delta Galil Industries
Click here to see how much of its profit Delta Galil Industries paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that Delta Galil Industries's earnings are down 4.4% a year over the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Delta Galil Industries has delivered 8.9% dividend growth per year on average over the past 10 years.
Final Takeaway
Has Delta Galil Industries got what it takes to maintain its dividend payments? Delta Galil Industries has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. To summarise, Delta Galil Industries looks okay on this analysis, although it doesn't appear a stand-out opportunity.
On that note, you'll want to research what risks Delta Galil Industries is facing. We've identified 2 warning signs with Delta Galil Industries (at least 1 which makes us a bit uncomfortable), and understanding these should be part of your investment process.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.