Should You Buy Phoenix Financial Ltd (TLV:PHOE) For Its Upcoming Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Phoenix Financial Ltd (TLV:PHOE) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day 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. Thus, you can purchase Phoenix Financial's shares before the 4th of September in order to receive the dividend, which the company will pay on the 11th of September.

The company's next dividend payment will be ₪1.07362 per share, on the back of last year when the company paid a total of ₪1.52 to shareholders. Based on the last year's worth of payments, Phoenix Financial stock has a trailing yield of around 3.9% on the current share price of ₪38.85. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Phoenix Financial can afford its dividend, and if the dividend could grow.

See our latest analysis for Phoenix Financial

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. Fortunately Phoenix Financial's payout ratio is modest, at just 39% of profit.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Phoenix Financial 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Phoenix Financial's earnings per share have been growing at 17% 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. In the last 10 years, Phoenix Financial has lifted its dividend by approximately 1.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Phoenix Financial is keeping back more of its profits to grow the business.

Final Takeaway

Has Phoenix Financial got what it takes to maintain its dividend payments? Companies like Phoenix Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Phoenix Financial ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

So while Phoenix Financial looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 1 warning sign with Phoenix Financial and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.