Be Sure To Check Out Automatic Bank Services Limited (TLV:SHVA) Before It Goes Ex-Dividend

Automatic Bank Services Limited (TLV:SHVA) stock is about to trade ex-dividend in three days. The ex-dividend date is two business days before a company's record date in most cases, 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 at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Automatic Bank Services' shares on or after the 7th of April will not receive the dividend, which will be paid on the 21st of April.

The company's upcoming dividend is ₪0.75 a share, following on from the last 12 months, when the company distributed a total of ₪0.62 per share to shareholders. Looking at the last 12 months of distributions, Automatic Bank Services has a trailing yield of approximately 2.7% on its current stock price of ₪23.16. 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 Automatic Bank Services has been able to grow its dividends, or if the dividend might be cut.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Automatic Bank Services paid out 61% 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.

See our latest analysis for Automatic Bank Services

Click here to see how much of its profit Automatic Bank Services 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Automatic Bank Services's earnings per share have been growing at 12% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Automatic Bank Services has delivered an average of 21% per year annual increase in its dividend, based on the past four years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

From a dividend perspective, should investors buy or avoid Automatic Bank Services? Earnings per share are growing at an attractive rate, and Automatic Bank Services is paying out a bit over half its profits. We think this is a pretty attractive combination, and would be interested in investigating Automatic Bank Services more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 1 warning sign with Automatic Bank Services 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.