Polyram Plastic Industries LTD (TLV:POLP) Is About To Go Ex-Dividend, And It Pays A 4.1% Yield

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Polyram Plastic Industries LTD (TLV:POLP) is about to trade ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Therefore, if you purchase Polyram Plastic Industries' shares on or after the 30th of May, you won't be eligible to receive the dividend, when it is paid on the 10th of June.

The company's next dividend payment will be ₪0.0935772 per share, and in the last 12 months, the company paid a total of ₪0.45 per share. 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 ₪10.97. 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 Polyram Plastic Industries

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Polyram Plastic Industries paid out 55% of its earnings to investors last year, a normal payout level for most businesses. 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. Fortunately, it paid out only 39% of its free cash flow in the past year.

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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 3.1% 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Polyram Plastic Industries has delivered 31% dividend growth per year on average over the past three years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Polyram Plastic Industries? Earnings per share growth has been modest and Polyram Plastic Industries paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

While it's tempting to invest in Polyram Plastic Industries for the dividends alone, you should always be mindful of the risks involved. For example, we've found 2 warning signs for Polyram Plastic Industries that we recommend you consider before investing in the business.

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.