Why You Might Be Interested In Kafrit Industries (1993) Ltd (TLV:KAFR) For Its Upcoming Dividend

Kafrit Industries (1993) Ltd (TLV:KAFR) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be two business days 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Kafrit Industries (1993)'s shares before the 10th of December in order to be eligible for the dividend, which will be paid on the 29th of December.

The company's upcoming dividend is ₪0.2076992 a share, following on from the last 12 months, when the company distributed a total of ₪0.77 per share to shareholders. Looking at the last 12 months of distributions, Kafrit Industries (1993) has a trailing yield of approximately 2.8% on its current stock price of ₪27.22. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Kafrit Industries (1993) can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Kafrit Industries (1993) paying out a modest 31% 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. It paid out 22% of its free cash flow as dividends last year, which is conservatively low.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for Kafrit Industries (1993)

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. For this reason, we're glad to see Kafrit Industries (1993)'s earnings per share have risen 16% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Kafrit Industries (1993) has increased its dividend at approximately 10% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy Kafrit Industries (1993) for the upcoming dividend? 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. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Kafrit Industries (1993) for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 2 warning signs with Kafrit Industries (1993) and understanding them should be part of your investment process.

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.