Should Income Investors Look At Africa Israel Residences Ltd (TLV:AFRE) Before Its Ex-Dividend?

Readers hoping to buy Africa Israel Residences Ltd (TLV:AFRE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Africa Israel Residences' shares on or after the 26th of March, you won't be eligible to receive the dividend, when it is paid on the 16th of April.

The company's next dividend payment will be ₪2.372754 per share. Last year, in total, the company distributed ₪5.69 to shareholders. Calculating the last year's worth of payments shows that Africa Israel Residences has a trailing yield of 2.3% on the current share price of ₪249.30. If you buy this business for its dividend, you should have an idea of whether Africa Israel Residences's dividend is reliable and sustainable. As a result, readers should always check whether Africa Israel Residences has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Africa Israel Residences

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. Africa Israel Residences is paying out an acceptable 53% of its profit, a common payout level among most companies. 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 27% of its free cash flow in the past year.

It's positive to see that Africa Israel Residences'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 Africa Israel Residences paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That explains why we're not overly excited about Africa Israel Residences's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings growth has been slim and the company is paying out more than half 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. Africa Israel Residences has delivered 5.8% dividend growth per year on average over the past 10 years.

Final Takeaway

Is Africa Israel Residences worth buying for its dividend? Earnings per share have been flat and Africa Israel Residences's dividend payouts are within reasonable limits; without a sharp decline in earnings we feel that the dividend is likely somewhat sustainable. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

While it's tempting to invest in Africa Israel Residences for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 3 warning signs for Africa Israel Residences (1 is potentially serious!) that you ought to be aware of before buying the shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.