There's A Lot To Like About Aran Research & Development (1982)'s (TLV:ARAN) Upcoming ₪1.23 Dividend

It looks like Aran Research & Development (1982) Ltd. (TLV:ARAN) is about to go ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Aran Research & Development (1982)'s shares on or after the 5th of September will not receive the dividend, which will be paid on the 12th of September.

The company's next dividend payment will be ₪1.23 per share. Last year, in total, the company distributed ₪1.23 to shareholders. Last year's total dividend payments show that Aran Research & Development (1982) has a trailing yield of 6.1% on the current share price of ₪19.98. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Aran Research & Development (1982)

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Aran Research & Development (1982) has a low and conservative payout ratio of just 7.2% of its income after tax. A useful secondary check can be to evaluate whether Aran Research & Development (1982) generated enough free cash flow to afford its dividend.

Click here to see how much of its profit Aran Research & Development (1982) 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. For this reason, we're glad to see Aran Research & Development (1982)'s earnings per share have risen 20% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Aran Research & Development (1982) has increased its dividend at approximately 4.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Aran Research & Development (1982) is keeping back more of its profits to grow the business.

The Bottom Line

From a dividend perspective, should investors buy or avoid Aran Research & Development (1982)? Aran Research & Development (1982) has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Aran Research & Development (1982), and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 4 warning signs for Aran Research & Development (1982) (1 can't be ignored!) that deserve your attention before investing in the shares.

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.