Is It Smart To Buy Mizrahi Tefahot Bank Ltd. (TLV:MZTF) Before It Goes Ex-Dividend?

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Mizrahi Tefahot Bank Ltd. (TLV:MZTF) is about to go ex-dividend in just 2 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Mizrahi Tefahot Bank's shares on or after the 28th of May will not receive the dividend, which will be paid on the 8th of June.

The company's next dividend payment will be ₪1.9897388 per share, on the back of last year when the company paid a total of ₪8.44 to shareholders. Based on the last year's worth of payments, Mizrahi Tefahot Bank has a trailing yield of 4.4% on the current stock price of ₪192.80. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

We've discovered 1 warning sign about Mizrahi Tefahot Bank. View them for free.

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. Mizrahi Tefahot Bank paid out a comfortable 40% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Check out our latest analysis for Mizrahi Tefahot Bank

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Mizrahi Tefahot Bank's earnings have been skyrocketing, up 22% per annum for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Mizrahi Tefahot Bank has increased its dividend at approximately 39% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

From a dividend perspective, should investors buy or avoid Mizrahi Tefahot Bank? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Mizrahi Tefahot Bank appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

While it's tempting to invest in Mizrahi Tefahot Bank for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Mizrahi Tefahot Bank and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.