Readers hoping to buy Gad-Dairies (Marketing 1992) Ltd. (TLV:GAD) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Gad-Dairies (Marketing 1992)'s shares before the 2nd of September in order to be eligible for the dividend, which will be paid on the 23rd of September.
The company's next dividend payment will be ₪0.31007 per share. Last year, in total, the company distributed ₪0.31 to shareholders. Based on the last year's worth of payments, Gad-Dairies (Marketing 1992) stock has a trailing yield of around 2.2% on the current share price of ₪14.34. 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 Gad-Dairies (Marketing 1992) 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. That's why it's good to see Gad-Dairies (Marketing 1992) paying out a modest 28% of its earnings. A useful secondary check can be to evaluate whether Gad-Dairies (Marketing 1992) generated enough free cash flow to afford its dividend. Gad-Dairies (Marketing 1992) paid out more free cash flow than it generated - 142%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
While Gad-Dairies (Marketing 1992)'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. Cash is king, as they say, and were Gad-Dairies (Marketing 1992) to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
See our latest analysis for Gad-Dairies (Marketing 1992)
Click here to see how much of its profit Gad-Dairies (Marketing 1992) 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. This is why it's a relief to see Gad-Dairies (Marketing 1992) earnings per share are up 6.6% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
We'd also point out that Gad-Dairies (Marketing 1992) issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Given that Gad-Dairies (Marketing 1992) has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Is Gad-Dairies (Marketing 1992) an attractive dividend stock, or better left on the shelf? Gad-Dairies (Marketing 1992) delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 142% of its cash flow over the last year, which is a mediocre outcome. Overall, it's hard to get excited about Gad-Dairies (Marketing 1992) from a dividend perspective.
Curious about whether Gad-Dairies (Marketing 1992) has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.
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.