Why You Might Be Interested In Shufersal Ltd (TLV:SAE) For Its Upcoming Dividend

Readers hoping to buy Shufersal Ltd (TLV:SAE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Shufersal's shares on or after the 9th of April will not receive the dividend, which will be paid on the 6th of May.

The company's next dividend payment will be ₪1.3509953 per share, on the back of last year when the company paid a total of ₪0.68 to shareholders. Last year's total dividend payments show that Shufersal has a trailing yield of 1.9% on the current share price of ₪36.17. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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. Fortunately Shufersal's payout ratio is modest, at just 29% of profit. A useful secondary check can be to evaluate whether Shufersal generated enough free cash flow to afford its dividend. Luckily it paid out just 9.6% of its free cash flow last year.

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.

Check out our latest analysis for Shufersal

Click here to see how much of its profit Shufersal paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Shufersal's earnings per share have been growing at 17% a year for the past five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits 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. Shufersal's dividend payments are broadly unchanged compared to where they were 10 years ago.

The Bottom Line

Is Shufersal an attractive dividend stock, or better left on the shelf? Shufersal 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. It's a promising combination that should mark this company worthy of closer attention.

Curious about whether Shufersal has been able to consistently generate growth? Here's a chart of its historical revenue and earnings growth.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.