Holmes Place International Ltd (TLV:HLMS) Is About To Go Ex-Dividend, And It Pays A 4.2% Yield

Readers hoping to buy Holmes Place International Ltd (TLV:HLMS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. 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, Holmes Place International investors that purchase the stock on or after the 13th of June will not receive the dividend, which will be paid on the 2nd of July.

The company's next dividend payment will be ₪0.1419531 per share, on the back of last year when the company paid a total of ₪0.22 to shareholders. Based on the last year's worth of payments, Holmes Place International stock has a trailing yield of around 4.2% on the current share price of ₪5.183. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Holmes Place International can afford its dividend, and if the dividend could grow.

View our latest analysis for Holmes Place International

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Holmes Place International distributed an unsustainably high 138% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's good to see that while Holmes Place International's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

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 11% a year for the past five years.

Unfortunately Holmes Place International has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

Should investors buy Holmes Place International for the upcoming dividend? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. In summary, while it has some positive characteristics, we're not inclined to race out and buy Holmes Place International today.

If you want to look further into Holmes Place International, it's worth knowing the risks this business faces. Our analysis shows 1 warning sign for Holmes Place International and you should be aware of this before buying any 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.