Should You Buy Victory Supermarket Chain Ltd (TLV:VCTR) For Its Upcoming Dividend?

Victory Supermarket Chain Ltd (TLV:VCTR) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, Victory Supermarket Chain investors that purchase the stock on or after the 5th of September will not receive the dividend, which will be paid on the 25th of September.

The company's upcoming dividend is ₪1.057829 a share, following on from the last 12 months, when the company distributed a total of ₪1.04 per share to shareholders. Last year's total dividend payments show that Victory Supermarket Chain has a trailing yield of 2.4% on the current share price of ₪43.76. 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.

See our latest analysis for Victory Supermarket Chain

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. 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. The good news is it paid out just 16% of its free cash flow in the last year.

Click here to see how much of its profit Victory Supermarket Chain 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. This is why it's a relief to see Victory Supermarket Chain earnings per share are up 9.1% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Victory Supermarket Chain has delivered an average of 10% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Victory Supermarket Chain an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Victory Supermarket Chain is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Victory Supermarket Chain is halfway there. Victory Supermarket Chain looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Keen to explore more data on Victory Supermarket Chain's financial performance? Check out our visualisation of its historical revenue and earnings growth.

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.