Readers hoping to buy Delta Galil Industries Ltd. (TLV:DELG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day 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 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 Delta Galil Industries’ shares before the 17th of August in order to be eligible for the dividend, which will be paid on the 30th of August.
The company’s next dividend payment will be US$0.27 per share, on the back of last year when the company paid a total of US$1.02 to shareholders. Calculating the last year’s worth of payments shows that Delta Galil Industries has a trailing yield of 2.6% on the current share price of ₪148.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Delta Galil Industries can afford its dividend, and if the dividend could grow.
See our latest analysis for Delta Galil Industries
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Fortunately Delta Galil Industries’s payout ratio is modest, at just 30% of profit. 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 22% 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.
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 consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we’re glad to see Delta Galil Industries’s earnings per share have risen 11% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination – plus the dividend can always be increased later.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Delta Galil Industries has lifted its dividend by approximately 11% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Should investors buy Delta Galil Industries for the upcoming dividend? It’s great that Delta Galil Industries is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It’s disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Delta Galil Industries looks solid on this analysis overall, and we’d definitely consider investigating it more closely.
On that note, you’ll want to research what risks Delta Galil Industries is facing. In terms of investment risks, we’ve identified 2 warning signs with Delta Galil Industries and understanding them should be part of your investment process.
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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.