Keystone Infra Ltd (TLV:KSTN) Looks Interesting, And It's About To Pay A Dividend

Keystone Infra Ltd (TLV:KSTN) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. In other words, investors can purchase Keystone Infra's shares before the 15th of October in order to be eligible for the dividend, which will be paid on the 28th of October.

The company's next dividend payment will be ₪0.1085249 per share. Last year, in total, the company distributed ₪0.39 to shareholders. Looking at the last 12 months of distributions, Keystone Infra has a trailing yield of approximately 7.4% on its current stock price of ₪5.326. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Keystone Infra has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Keystone Infra

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Keystone Infra has a low and conservative payout ratio of just 20% of its income after tax.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Keystone Infra 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Keystone Infra has grown its earnings rapidly, up 25% a year for the past five years.

We'd also point out that Keystone Infra issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Keystone Infra has seen its dividend decline 3.2% per annum on average over the past three years, which is not great to see. Keystone Infra 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

From a dividend perspective, should investors buy or avoid Keystone Infra? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. We think this is a pretty attractive combination, and would be interested in investigating Keystone Infra more closely.

While it's tempting to invest in Keystone Infra for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 2 warning signs with Keystone Infra and understanding them should be part of your investment process.

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.