Here's What We Like About Shaniv Paper Industry Ltd's (TLV:SHAN) Upcoming Dividend

It looks like Shaniv Paper Industry Ltd (TLV:SHAN) is about to go ex-dividend in the next 3 days. You can purchase shares before the 21st of June in order to receive the dividend, which the company will pay on the 2nd of July.

Shaniv Paper Industry's next dividend payment will be ₪0.032 per share, on the back of last year when the company paid a total of ₪0.096 to shareholders. Last year's total dividend payments show that Shaniv Paper Industry has a trailing yield of 1.7% on the current share price of ₪5.675. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Shaniv Paper Industry has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Shaniv Paper Industry

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. Shaniv Paper Industry paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Shaniv Paper Industry generated enough free cash flow to afford its dividend. Fortunately, it paid out only 39% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Shaniv Paper Industry 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. For this reason, we're glad to see Shaniv Paper Industry's earnings per share have risen 16% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last seven years, Shaniv Paper Industry has lifted its dividend by approximately 3.8% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Is Shaniv Paper Industry worth buying for its dividend? Shaniv Paper Industry has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past seven years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Shaniv Paper Industry, and we would prioritise taking a closer look at it.

So while Shaniv Paper Industry looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with Shaniv Paper Industry and understanding them should be part of your investment process.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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. Thank you for reading.