Dividend Investors: Don't Be Too Quick To Buy Opal Balance Investments Ltd (TLV:OPAL) For Its Upcoming Dividend

Opal Balance Investments Ltd (TLV:OPAL) stock is about to trade ex-dividend in two days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Meaning, you will need to purchase Opal Balance Investments' shares before the 6th of January to receive the dividend, which will be paid on the 13th of January.

The company's upcoming dividend is ₪0.047798 a share, following on from the last 12 months, when the company distributed a total of ₪0.13 per share to shareholders. Looking at the last 12 months of distributions, Opal Balance Investments has a trailing yield of approximately 5.3% on its current stock price of ₪2.399. 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 Opal Balance Investments can afford its dividend, and if the dividend could grow.

View our latest analysis for Opal Balance Investments

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Opal Balance Investments paid out 57% of its earnings to investors last year, a normal payout level for most businesses.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Opal Balance Investments paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that Opal Balance Investments's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Opal Balance Investments has seen its dividend decline 1.9% per annum on average over the past eight years, which is not great to see.

Final Takeaway

Has Opal Balance Investments got what it takes to maintain its dividend payments? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in Opal Balance Investments despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. We've identified 3 warning signs with Opal Balance Investments (at least 1 which is a bit concerning), and understanding these should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.