Here's What We Like About Kafrit Industries (1993)'s (TLV:KAFR) Upcoming Dividend

It looks like Kafrit Industries (1993) Ltd (TLV:KAFR) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Kafrit Industries (1993)'s shares before the 7th of April in order to receive the dividend, which the company will pay on the 25th of April.

The company's upcoming dividend is ₪0.1885469 a share, following on from the last 12 months, when the company distributed a total of ₪0.67 per share to shareholders. Based on the last year's worth of payments, Kafrit Industries (1993) stock has a trailing yield of around 3.7% on the current share price of ₪18.32. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Kafrit Industries (1993)

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. Kafrit Industries (1993) paid out a comfortable 46% 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. What's good is that dividends were well covered by free cash flow, with the company paying out 24% of its cash flow last year.

It's positive to see that Kafrit Industries (1993)'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 Kafrit Industries (1993) 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. This is why it's a relief to see Kafrit Industries (1993) earnings per share are up 6.6% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Kafrit Industries (1993) has lifted its dividend by approximately 8.9% 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

Is Kafrit Industries (1993) an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Kafrit Industries (1993) is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Kafrit Industries (1993) is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Kafrit Industries (1993) is facing. To that end, you should learn about the 2 warning signs we've spotted with Kafrit Industries (1993) (including 1 which can't be ignored).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.