Three Days Left Until NewMed Energy - Limited Partnership (TLV:NWMD) Trades Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see NewMed Energy - Limited Partnership (TLV:NWMD) 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, NewMed Energy - Limited Partnership investors that purchase the stock on or after the 30th of August will not receive the dividend, which will be paid on the 14th of September.

The company's upcoming dividend is US$0.043 a share, following on from the last 12 months, when the company distributed a total of US$0.18 per share to shareholders. Last year's total dividend payments show that NewMed Energy - Limited Partnership has a trailing yield of 6.1% on the current share price of ₪11.2. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for NewMed Energy - Limited Partnership

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately NewMed Energy - Limited Partnership's payout ratio is modest, at just 43% of profit. 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 45% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that NewMed Energy - Limited Partnership'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 NewMed Energy - Limited Partnership paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. NewMed Energy - Limited Partnership's earnings per share have fallen at approximately 10.0% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. NewMed Energy - Limited Partnership's dividend payments are effectively flat on where they were eight years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.

To Sum It Up

Is NewMed Energy - Limited Partnership worth buying for its dividend? NewMed Energy - Limited Partnership has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So while NewMed Energy - Limited Partnership looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - NewMed Energy - Limited Partnership has 2 warning signs we think you should be aware of.

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.