Tamar Petroleum Ltd (TLV:TMRP) Stock Goes Ex-Dividend In Just Three Days

Tamar Petroleum Ltd (TLV:TMRP) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, 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 two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Tamar Petroleum investors that purchase the stock on or after the 2nd of September will not receive the dividend, which will be paid on the 16th of September.

The company's next dividend payment will be US$0.1356 per share. Last year, in total, the company distributed US$0.27 to shareholders. Based on the last year's worth of payments, Tamar Petroleum stock has a trailing yield of around 5.1% on the current share price of ₪19.69. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Tamar Petroleum

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. Fortunately Tamar Petroleum's payout ratio is modest, at just 44% of profit. A useful secondary check can be to evaluate whether Tamar Petroleum generated enough free cash flow to afford its dividend. Fortunately, it paid out only 33% of its free cash flow in the past year.

It's positive to see that Tamar Petroleum'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 Tamar Petroleum paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Tamar Petroleum's earnings per share have dropped 13% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tamar Petroleum's dividend payments per share have declined at 4.7% per year on average over the past six years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Has Tamar Petroleum got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall, it's hard to get excited about Tamar Petroleum from a dividend perspective.

While it's tempting to invest in Tamar Petroleum for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 3 warning signs for Tamar Petroleum (2 shouldn't be ignored) you should be aware of.

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.