There's A Lot To Like About Inrom Construction Industries' (TLV:INRM) Upcoming ₪0.0463095 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Inrom Construction Industries Ltd (TLV:INRM) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Inrom Construction Industries' shares on or after the 10th of April will not receive the dividend, which will be paid on the 18th of April.

The company's next dividend payment will be ₪0.0463095 per share. Last year, in total, the company distributed ₪0.33 to shareholders. Based on the last year's worth of payments, Inrom Construction Industries has a trailing yield of 2.9% on the current stock price of ₪11.53. If you buy this business for its dividend, you should have an idea of whether Inrom Construction Industries's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Inrom Construction Industries

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. Inrom Construction Industries is paying out just 8.7% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 25% of its free cash flow in the last 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 Inrom Construction 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Inrom Construction Industries, with earnings per share up 8.2% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Inrom Construction Industries's dividend payments per share have declined at 6.1% per year on average over the past nine years, which is uninspiring. Inrom Construction Industries is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Has Inrom Construction Industries got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Inrom Construction Industries is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Inrom Construction Industries is halfway there. There's a lot to like about Inrom Construction Industries, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Inrom Construction Industries is facing. For example - Inrom Construction Industries has 1 warning sign we think you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.