Should You Buy M.Yochananof and Sons (1988) Ltd (TLV:YHNF) For Its Upcoming Dividend?

M.Yochananof and Sons (1988) Ltd (TLV:YHNF) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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, M.Yochananof and Sons (1988) investors that purchase the stock on or after the 28th of August will not receive the dividend, which will be paid on the 9th of September.

The company's next dividend payment will be ₪1.38 per share. Last year, in total, the company distributed ₪4.14 to shareholders. Looking at the last 12 months of distributions, M.Yochananof and Sons (1988) has a trailing yield of approximately 2.0% on its current stock price of ₪207.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether M.Yochananof and Sons (1988) has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for M.Yochananof and Sons (1988)

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. M.Yochananof and Sons (1988) paid out a comfortable 47% of its profit last year. 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 35% 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 M.Yochananof and Sons (1988) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see M.Yochananof and Sons (1988) earnings per share are up 6.6% 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. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. M.Yochananof and Sons (1988) has seen its dividend decline 5.3% per annum on average over the past three years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

The Bottom Line

From a dividend perspective, should investors buy or avoid M.Yochananof and Sons (1988)? Earnings per share have been growing moderately, and M.Yochananof and Sons (1988) is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. 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 M.Yochananof and Sons (1988) is halfway there. M.Yochananof and Sons (1988) looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Curious about whether M.Yochananof and Sons (1988) 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.