It looks like Amot Investments Ltd. (TLV:AMOT) 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Amot Investments investors that purchase the stock on or after the 24th of August will not receive the dividend, which will be paid on the 8th of September.
The company's next dividend payment will be ₪0.27 per share, and in the last 12 months, the company paid a total of ₪1.31 per share. Looking at the last 12 months of distributions, Amot Investments has a trailing yield of approximately 6.7% on its current stock price of ₪19.55. 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 Amot Investments can afford its dividend, and if the dividend could grow.
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. Amot Investments is paying out an acceptable 65% of its profit, a common payout level among most companies. 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. Dividends consumed 66% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Amot Investments'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 Amot Investments
Click here to see how much of its profit Amot Investments paid out over the last 12 months.
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. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Amot Investments's earnings per share have been growing at 17% a year for the past five years. Amot Investments is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
We'd also point out that Amot Investments issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Amot Investments has delivered 6.8% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Has Amot Investments got what it takes to maintain its dividend payments? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Amot Investments's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 65% and 66% respectively. To summarise, Amot Investments looks okay on this analysis, although it doesn't appear a stand-out opportunity.
On that note, you'll want to research what risks Amot Investments is facing. To that end, you should learn about the 4 warning signs we've spotted with Amot Investments (including 2 which don't sit too well with us).
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.