Kafrit Industries (1993) Ltd (TLV:KAFR) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Kafrit Industries (1993) Ltd (TLV:KAFR) is about to trade ex-dividend in the next 3 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 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, Kafrit Industries (1993) investors that purchase the stock on or after the 5th of December will not receive the dividend, which will be paid on the 26th of December.

The company's upcoming dividend is ₪0.1879485 a share, following on from the last 12 months, when the company distributed a total of ₪0.69 per share to shareholders. Last year's total dividend payments show that Kafrit Industries (1993) has a trailing yield of 2.6% on the current share price of ₪27.04. 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.

See our latest analysis for Kafrit Industries (1993)

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Kafrit Industries (1993) paying out a modest 27% of its earnings. 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. Thankfully its dividend payments took up just 34% of the free cash flow it generated, which is a comfortable payout ratio.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Kafrit Industries (1993)'s earnings per share have risen 14% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Kafrit Industries (1993) has increased its dividend at approximately 9.3% 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.

Final Takeaway

Has Kafrit Industries (1993) got what it takes to maintain its dividend payments? It's great that Kafrit Industries (1993) is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Kafrit Industries (1993), and we would prioritise taking a closer look at it.

In light of that, while Kafrit Industries (1993) has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 2 warning signs for Kafrit Industries (1993) 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.

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.