Just Two Days Till Ashot Ashkelon Industries Ltd. (TLV:ASHO) Will Be Trading Ex-Dividend

Ashot Ashkelon Industries Ltd. (TLV:ASHO) stock is about to trade ex-dividend in two 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Ashot Ashkelon Industries investors that purchase the stock on or after the 26th of May will not receive the dividend, which will be paid on the 5th of June.

The company's next dividend payment will be ₪0.6271674 per share. Last year, in total, the company distributed ₪0.76 to shareholders. Looking at the last 12 months of distributions, Ashot Ashkelon Industries has a trailing yield of approximately 1.4% on its current stock price of ₪53.81. 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 Ashot Ashkelon Industries can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, Ashot Ashkelon Industries paid out 102% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. A useful secondary check can be to evaluate whether Ashot Ashkelon Industries generated enough free cash flow to afford its dividend. Fortunately, it paid out only 34% of its free cash flow in the past year.

It's good to see that while Ashot Ashkelon Industries's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

See 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?

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. That's why it's comforting to see Ashot Ashkelon Industries's earnings have been skyrocketing, up 22% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Ashot Ashkelon Industries has delivered an average of 37% 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.

Final Takeaway

Should investors buy Ashot Ashkelon Industries for the upcoming dividend? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Ashot Ashkelon Industries's paying out such a high percentage of its profit. All things considered, we are not particularly enthused about Ashot Ashkelon Industries from a dividend perspective.

While it's tempting to invest in Ashot Ashkelon Industries for the dividends alone, you should always be mindful of the risks involved. For example - Ashot Ashkelon Industries has 1 warning sign we think you should be aware of.

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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.