Shufersal (TLV:SAE) Is Increasing Its Dividend To ₪1.35

The board of Shufersal Ltd (TLV:SAE) has announced that it will be increasing its dividend by 99% on the 6th of May to ₪1.35, up from last year's comparable payment of ₪0.677. Even though the dividend went up, the yield is still quite low at only 1.9%.

Shufersal's Future Dividend Projections Appear Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Shufersal's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 16.9% if recent trends continue. If the dividend continues on this path, the payout ratio could be 47% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Shufersal

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₪0.66 in 2015, and the most recent fiscal year payment was ₪0.677. Dividend payments have grown at less than 1% a year over this period. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Shufersal has grown earnings per share at 17% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Shufersal Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Shufersal stock. Is Shufersal not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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