Here's What We Like About Plasson Industries' (TLV:PLSN) Upcoming Dividend

It looks like Plasson Industries Ltd (TLV:PLSN) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible 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. Thus, you can purchase Plasson Industries' shares before the 7th of September in order to receive the dividend, which the company will pay on the 14th of September.

The company's next dividend payment will be ₪3.50 per share, on the back of last year when the company paid a total of ₪8.00 to shareholders. Looking at the last 12 months of distributions, Plasson Industries has a trailing yield of approximately 4.2% on its current stock price of ₪192.00. If you buy this business for its dividend, you should have an idea of whether Plasson Industries's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see Plasson Industries paying out a modest 45% of its earnings. 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. It distributed 50% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

Check out our latest analysis for Plasson Industries

Click here to see how much of its profit Plasson Industries paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Plasson Industries earnings per share are up 6.2% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Plasson Industries has lifted its dividend by approximately 7.2% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Plasson Industries worth buying for its dividend? Earnings per share have been growing moderately, and Plasson Industries is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Plasson Industries is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Plasson Industries, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Plasson Industries is facing. Every company has risks, and we've spotted 1 warning sign for Plasson Industries you should know about.

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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.