Diplomat Holdings Ltd (TLV:DIPL) Will Pay A ₪0.73 Dividend In Three Days

It looks like Diplomat Holdings Ltd (TLV:DIPL) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Diplomat Holdings investors that purchase the stock on or after the 3rd of September will not receive the dividend, which will be paid on the 11th of September.

The company's next dividend payment will be ₪0.73 per share. Last year, in total, the company distributed ₪0.73 to shareholders. Looking at the last 12 months of distributions, Diplomat Holdings has a trailing yield of approximately 2.3% on its current stock price of ₪31.89. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Diplomat Holdings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Diplomat Holdings

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 Diplomat Holdings paying out a modest 29% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.

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 Diplomat Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Diplomat Holdings's 6.8% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Diplomat Holdings has seen its dividend decline 56% per annum on average over the past two years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Is Diplomat Holdings worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Diplomat Holdings's dividend merits.

In light of that, while Diplomat Holdings has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for Diplomat Holdings and you should be aware of them before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.