Holmes Place International (TLV:HLMS) Could Be A Buy For Its Upcoming Dividend

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 commonly two business days 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Holmes Place International investors that purchase the stock on or after the 24th of June will not receive the dividend, which will be paid on the 9th of July.

The company's next dividend payment will be ₪0.1198387 per share, and in the last 12 months, the company paid a total of ₪0.31 per share. Looking at the last 12 months of distributions, Holmes Place International has a trailing yield of approximately 4.0% on its current stock price of ₪7.554. If you buy this business for its dividend, you should have an idea of whether Holmes Place International's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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 Holmes Place International's payout ratio is modest, at just 37% of profit. 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 62% 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.

Check out our latest analysis for Holmes Place International

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?

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 fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Holmes Place International's earnings per share have been growing at 18% a year for the past five years. Holmes Place International is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Holmes Place International's dividend payments per share have declined at 17% per year on average over the past two years, which is uninspiring. 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.

To Sum It Up

From a dividend perspective, should investors buy or avoid Holmes Place International? 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. Holmes Place International looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while Holmes Place International looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Holmes Place International has 2 warning signs we think you should be aware of.

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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.