Delek Group Ltd. (TLV:DLEKG) Stock Goes Ex-Dividend In Just Four Days

Delek Group Ltd. (TLV:DLEKG) stock is about to trade ex-dividend in four days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. In other words, investors can purchase Delek Group's shares before the 27th of November in order to be eligible for the dividend, which will be paid on the 10th of December.

The company's next dividend payment will be ₪15.037065 per share, on the back of last year when the company paid a total of ₪51.46 to shareholders. Based on the last year's worth of payments, Delek Group stock has a trailing yield of around 5.5% on the current share price of ₪927.60. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Delek Group paid out 108% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. 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 27% of the free cash flow it generated, which is a comfortable payout ratio.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Delek Group fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

See our latest analysis for Delek Group

Click here to see how much of its profit Delek Group paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 23% 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. It looks like the Delek Group dividends are largely the same as they were 10 years ago.

Final Takeaway

Should investors buy Delek Group for the upcoming dividend? It's good to see earnings per share growing and low cashflow payout ratio, although we're uncomfortable with Delek Group's paying out such a high percentage of its profit. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So while Delek Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 3 warning signs for Delek Group you should know about.

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.