Here's What We Like About Holmes Place International's (TLV:HLMS) Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Holmes Place International Ltd (TLV:HLMS) is about to go ex-dividend in just three 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. Thus, you can purchase Holmes Place International's shares before the 15th of December in order to receive the dividend, which the company will pay on the 2nd of January.

The company's next dividend payment will be ₪0.1637153 per share. Last year, in total, the company distributed ₪0.36 to shareholders. Calculating the last year's worth of payments shows that Holmes Place International has a trailing yield of 6.3% on the current share price of ₪5.701. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Holmes Place International can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Holmes Place International

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. That's why it's good to see Holmes Place International paying out a modest 44% of its earnings. A useful secondary check can be to evaluate whether Holmes Place International generated enough free cash flow to afford its dividend. Over the last year it paid out 51% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Holmes Place International's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Holmes Place International's earnings per share have been growing at 14% a year for the past five years. Holmes Place International has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Holmes Place International's dividend payments per share have declined at 9.4% per year on average over the past two years, which is uninspiring. Holmes Place International is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Has Holmes Place International got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Holmes Place International paid out less than half its earnings and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Holmes Place International is facing. For example, we've found 2 warning signs for Holmes Place International (1 is potentially serious!) that deserve your attention before investing in the 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.