Should You Buy Rami Levi Chain Stores Hashikma Marketing 2006 Ltd (TLV:RMLI) For Its Upcoming Dividend?

Simply Wall St · 12/07/2023 04:01

Readers hoping to buy Rami Levi Chain Stores Hashikma Marketing 2006 Ltd (TLV:RMLI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. This means that investors who purchase Rami Levi Chain Stores Hashikma Marketing 2006's shares on or after the 10th of December will not receive the dividend, which will be paid on the 17th of December.

The company's next dividend payment will be ₪2.54 per share, on the back of last year when the company paid a total of ₪12.49 to shareholders. Calculating the last year's worth of payments shows that Rami Levi Chain Stores Hashikma Marketing 2006 has a trailing yield of 6.1% on the current share price of ₪204.6. If you buy this business for its dividend, you should have an idea of whether Rami Levi Chain Stores Hashikma Marketing 2006's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Rami Levi Chain Stores Hashikma Marketing 2006

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. It paid out 88% 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. It could become a concern if earnings started to decline. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 44% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Rami Levi Chain Stores Hashikma Marketing 2006'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 Rami Levi Chain Stores Hashikma Marketing 2006 paid out over the last 12 months.

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TASE:RMLI Historic Dividend December 7th 2023

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Rami Levi Chain Stores Hashikma Marketing 2006's earnings per share have been growing at 13% a year for the past five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Rami Levi Chain Stores Hashikma Marketing 2006 has delivered 9.0% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has Rami Levi Chain Stores Hashikma Marketing 2006 got what it takes to maintain its dividend payments? Rami Levi Chain Stores Hashikma Marketing 2006's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

So while Rami Levi Chain Stores Hashikma Marketing 2006 looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Rami Levi Chain Stores Hashikma Marketing 2006 you should be aware of.

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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