There's A Lot To Like About Averbuch Formica Center's (TLV:AVER) Upcoming ₪1.19 Dividend

By
Simply Wall St
Published
January 27, 2022
TASE:AVER
Source: Shutterstock

Averbuch Formica Center Ltd. (TLV:AVER) stock is about to trade ex-dividend in 2 days. 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 Averbuch Formica Center's shares on or after the 30th of January will not receive the dividend, which will be paid on the 7th of February.

The company's next dividend payment will be ₪1.19 per share, and in the last 12 months, the company paid a total of ₪1.90 per share. Last year's total dividend payments show that Averbuch Formica Center has a trailing yield of 6.0% on the current share price of ₪31.6. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Averbuch Formica Center can afford its dividend, and if the dividend could grow.

View our latest analysis for Averbuch Formica Center

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. Averbuch Formica Center paid out more than half (74%) of its earnings last year, which is a regular payout ratio for most companies. 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. Averbuch Formica Center paid out more free cash flow than it generated - 188%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Averbuch Formica Center paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Averbuch Formica Center's ability to maintain its dividend.

Click here to see how much of its profit Averbuch Formica Center paid out over the last 12 months.

historic-dividend
TASE:AVER Historic Dividend January 27th 2022

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. It's encouraging to see Averbuch Formica Center has grown its earnings rapidly, up 21% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, eight years ago, Averbuch Formica Center has lifted its dividend by approximately 26% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

From a dividend perspective, should investors buy or avoid Averbuch Formica Center? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 188% of its cashflow, which is uncomfortably high. Overall, it's hard to get excited about Averbuch Formica Center from a dividend perspective.

So if you want to do more digging on Averbuch Formica Center, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 2 warning signs for Averbuch Formica Center that we recommend you consider before investing in the business.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.