Is It Smart To Buy Opal Balance Investments Ltd (TLV:OPAL) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Opal Balance Investments Ltd (TLV:OPAL) is about to trade ex-dividend in the next day or two. Investors can purchase shares before the 22nd of November in order to be eligible for this dividend, which will be paid on the 29th of November.

Opal Balance Investments's next dividend payment will be ₪0.024 per share, and in the last 12 months, the company paid a total of ₪0.13 per share. Calculating the last year's worth of payments shows that Opal Balance Investments has a trailing yield of 4.3% on the current share price of ₪3. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Opal Balance Investments has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Opal Balance Investments

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 Opal Balance Investments's payout ratio is modest, at just 36% of profit.

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 Opal Balance Investments 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Opal Balance Investments's earnings per share have been growing at 13% a year for the past five years.

We'd also point out that Opal Balance Investments 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Opal Balance Investments has seen its dividend decline 3.4% per annum on average over the past four years, which is not great to see. Opal Balance Investments 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 Opal Balance Investments got what it takes to maintain its dividend payments? Companies like Opal Balance Investments that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Opal Balance Investments appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 4 warning signs for Opal Balance Investments (of which 1 is potentially serious!) you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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