Don't Buy Amanet Management & Systems Ltd. (TLV:AMAN) For Its Next Dividend Without Doing These Checks

Amanet Management & Systems Ltd. (TLV:AMAN) stock is about to trade ex-dividend in three 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 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. Thus, you can purchase Amanet Management & Systems' shares before the 16th of October in order to receive the dividend, which the company will pay on the 25th of October.

The company's next dividend payment will be ₪0.46 per share, on the back of last year when the company paid a total of ₪0.92 to shareholders. Based on the last year's worth of payments, Amanet Management & Systems has a trailing yield of 4.9% on the current stock price of ₪18.61. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Amanet Management & Systems has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Amanet Management & Systems

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. Amanet Management & Systems's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Amanet Management & Systems didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. What's good is that dividends were well covered by free cash flow, with the company paying out 13% of its cash flow last year.

Click here to see how much of its profit Amanet Management & Systems paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Amanet Management & Systems reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Amanet Management & Systems has delivered 7.4% dividend growth per year on average over the past 10 years.

We update our analysis on Amanet Management & Systems every 24 hours, so you can always get the latest insights on its financial health, here.

The Bottom Line

Has Amanet Management & Systems got what it takes to maintain its dividend payments? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

So if you're still interested in Amanet Management & Systems despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. We've identified 3 warning signs with Amanet Management & Systems (at least 1 which is concerning), and understanding these should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.