Rotem Shani Entrepreneurship and Investment's (TLV:RTSN) Shareholders Will Receive A Smaller Dividend Than Last Year

Rotem Shani Entrepreneurship and Investment Ltd. (TLV:RTSN) is reducing its dividend to ₪0.992 on the 5th of Maywhich is 0.07% less than last year's comparable payment of ₪0.993. This means that the annual payment is 3.1% of the current stock price, which is lower than what the rest of the industry is paying.

We've discovered 3 warning signs about Rotem Shani Entrepreneurship and Investment. View them for free.

Rotem Shani Entrepreneurship and Investment's Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Rotem Shani Entrepreneurship and Investment's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the trend of the last few years continues, EPS will grow by 44.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Rotem Shani Entrepreneurship and Investment

Rotem Shani Entrepreneurship and Investment Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Rotem Shani Entrepreneurship and Investment has seen EPS rising for the last five years, at 44% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While Rotem Shani Entrepreneurship and Investment is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Rotem Shani Entrepreneurship and Investment you should be aware of, and 2 of them are concerning. Is Rotem Shani Entrepreneurship and Investment not quite the opportunity you were looking for? Why not check out 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.