Shaniv Paper Industry (TLV:SHAN) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy Shaniv Paper Industry Ltd (TLV:SHAN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 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. This means that investors who purchase Shaniv Paper Industry's shares on or after the 16th of September will not receive the dividend, which will be paid on the 1st of October.

The company's next dividend payment will be ₪0.0396467 per share, and in the last 12 months, the company paid a total of ₪0.13 per share. Last year's total dividend payments show that Shaniv Paper Industry has a trailing yield of 3.6% on the current share price of ₪3.525. 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! As a result, readers should always check whether Shaniv Paper Industry has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Shaniv Paper Industry

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Shaniv Paper Industry's payout ratio is modest, at just 40% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 29% of its free cash flow in the past year.

It's positive to see that Shaniv Paper Industry'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 Shaniv Paper Industry 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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Shaniv Paper Industry, with earnings per share up 5.1% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Shaniv Paper Industry has delivered 5.5% dividend growth per year on average over the past 10 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

Is Shaniv Paper Industry worth buying for its dividend? Earnings per share have been growing moderately, and Shaniv Paper Industry is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Shaniv Paper Industry is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Shaniv Paper Industry has an appealing dividend, it's worth knowing the risks involved with this stock. To that end, you should learn about the 4 warning signs we've spotted with Shaniv Paper Industry (including 1 which can't be ignored).

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.