Here's What We Like About Polyram Plastic Industries' (TLV:POLP) Upcoming Dividend

Polyram Plastic Industries LTD (TLV:POLP) stock is about to trade ex-dividend in 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. Thus, you can purchase Polyram Plastic Industries' shares before the 27th of August in order to receive the dividend, which the company will pay on the 5th of September.

The company's next dividend payment will be ₪0.0935772 per share, on the back of last year when the company paid a total of ₪0.45 to shareholders. Looking at the last 12 months of distributions, Polyram Plastic Industries has a trailing yield of approximately 4.1% on its current stock price of ₪11.07. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Polyram Plastic Industries has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Polyram Plastic Industries

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. That's why it's good to see Polyram Plastic Industries 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 more than half (56%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Polyram Plastic Industries'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 Polyram Plastic Industries paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Polyram Plastic Industries, with earnings per share up 3.6% on average over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last three years, Polyram Plastic Industries has lifted its dividend by approximately 31% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Polyram Plastic Industries? Earnings per share growth has been modest, and it's interesting that Polyram Plastic Industries is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. In summary, while it has some positive characteristics, we're not inclined to race out and buy Polyram Plastic Industries today.

So while Polyram Plastic Industries looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Polyram Plastic Industries that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.