Delek Group Ltd. (TLV:DLEKG) Looks Interesting, And It's About To Pay A Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Delek Group Ltd. (TLV:DLEKG) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Delek Group investors that purchase the stock on or after the 1st of December will not receive the dividend, which will be paid on the 15th of December.

The company's next dividend payment will be ₪13.6233 per share, on the back of last year when the company paid a total of ₪48.66 to shareholders. Based on the last year's worth of payments, Delek Group has a trailing yield of 9.9% on the current stock price of ₪492.00. If you buy this business for its dividend, you should have an idea of whether Delek Group's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Delek Group

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. Delek Group has a low and conservative payout ratio of just 20% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Delek Group'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.

Click here to see how much of its profit Delek Group 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Delek Group has grown its earnings rapidly, up 45% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Delek Group has lifted its dividend by approximately 0.5% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Is Delek Group an attractive dividend stock, or better left on the shelf? Delek Group has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Delek Group has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 2 warning signs with Delek Group (at least 1 which is a bit unpleasant), 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.

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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.