Stock Analysis

Read This Before Considering Supergas Energy Ltd (TLV:SPGE) For Its Upcoming ₪0.94 Dividend

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TASE:ELCP
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Supergas Energy Ltd (TLV:SPGE) is about to trade ex-dividend in the next day or so. You will need to purchase shares before the 15th of March to receive the dividend, which will be paid on the 4th of April.

Supergas Energy's next dividend payment will be ₪0.94 per share, and in the last 12 months, the company paid a total of ₪3.22 per share. Based on the last year's worth of payments, Supergas Energy stock has a trailing yield of around 3.4% on the current share price of ₪74. 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.

Check out our latest analysis for Supergas Energy

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. Supergas Energy paid out a comfortable 47% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 25% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

historic-dividend
TASE:SPGE Historic Dividend March 13th 2021

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Supergas Energy's earnings per share have been shrinking at 4.1% a year over the previous three years.

We'd also point out that Supergas Energy 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.

Unfortunately Supergas Energy has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

To Sum It Up

From a dividend perspective, should investors buy or avoid Supergas Energy? Supergas Energy 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.

In light of that, while Supergas Energy has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 2 warning signs for Supergas Energy that we strongly recommend you have a look at before investing in the company.

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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