Should You Buy Sano Bruno's Enterprises Ltd (TLV:SANO1) For Its Upcoming Dividend?

It looks like Sano Bruno's Enterprises Ltd (TLV:SANO1) is about to go ex-dividend in the next 3 days. If you purchase the stock on or after the 13th of December, you won't be eligible to receive this dividend, when it is paid on the 27th of December.

Sano Bruno's Enterprises's next dividend payment will be ₪7.00 per share, and in the last 12 months, the company paid a total of ₪7.00 per share. Calculating the last year's worth of payments shows that Sano Bruno's Enterprises has a trailing yield of 2.4% on the current share price of ₪287.7. If you buy this business for its dividend, you should have an idea of whether Sano Bruno's Enterprises's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Sano Bruno's Enterprises

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. Sano Bruno's Enterprises paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies. 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. It paid out 19% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Sano Bruno's Enterprises'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 Sano Bruno's Enterprises 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 fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Sano Bruno's Enterprises's earnings per share have risen 11% per annum over the last five years. Sano Bruno's Enterprises has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Sano Bruno's Enterprises has increased its dividend at approximately 7.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Sano Bruno's Enterprises? Sano Bruno's Enterprises's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about Sano Bruno's Enterprises, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Sano Bruno's Enterprises is facing. Case in point: We've spotted 1 warning sign for Sano Bruno's Enterprises you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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