Ashot Ashkelon Industries Ltd. (TLV:ASHO) Passed Our Checks, And It's About To Pay A ₪0.6252192 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 Ashot Ashkelon Industries Ltd. (TLV:ASHO) is about to go ex-dividend in just three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. In other words, investors can purchase Ashot Ashkelon Industries' shares before the 1st of December in order to be eligible for the dividend, which will be paid on the 8th of December.

The company's upcoming dividend is ₪0.6252192 a share, following on from the last 12 months, when the company distributed a total of ₪1.26 per share to shareholders. Looking at the last 12 months of distributions, Ashot Ashkelon Industries has a trailing yield of approximately 2.0% on its current stock price of ₪62.24. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. Ashot Ashkelon Industries paid out 61% of its earnings to investors last year, a normal payout level for most businesses. 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. Dividends consumed 59% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Ashot Ashkelon 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.

Check out our latest analysis for Ashot Ashkelon Industries

Click here to see how much of its profit Ashot Ashkelon Industries 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. That's why it's comforting to see Ashot Ashkelon Industries's earnings have been skyrocketing, up 28% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Ashot Ashkelon Industries could have strong prospects for future increases to the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ashot Ashkelon Industries has delivered an average of 62% per year annual increase in its dividend, based on the past three years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is Ashot Ashkelon Industries an attractive dividend stock, or better left on the shelf? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Ashot Ashkelon Industries's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 61% and 59% respectively. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Ashot Ashkelon Industries's dividend merits.

On that note, you'll want to research what risks Ashot Ashkelon Industries is facing. To help with this, we've discovered 1 warning sign for Ashot Ashkelon Industries that you should be aware of before investing in their shares.

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.