We Wouldn't Be Too Quick To Buy Amot Investment Ltd (TLV:AMOT) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Amot Investment Ltd (TLV:AMOT) is about to go ex-dividend in just four days. 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. Meaning, you will need to purchase Amot Investment's shares before the 20th of February to receive the dividend, which will be paid on the 29th of February.

The company's next dividend payment will be ₪0.49 per share, and in the last 12 months, the company paid a total of ₪1.30 per share. Calculating the last year's worth of payments shows that Amot Investment has a trailing yield of 7.3% on the current share price of ₪17.72. If you buy this business for its dividend, you should have an idea of whether Amot Investment's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Amot Investment

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Amot Investment paid out 74% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 64% of its free cash flow as dividends, within the usual range for most companies.

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.

Click here to see how much of its profit Amot Investment paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Amot Investment's earnings are down 3.0% a year over the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Amot Investment has delivered 7.3% dividend growth per year on average over the past 10 years. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

The Bottom Line

From a dividend perspective, should investors buy or avoid Amot Investment? It's never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We're aware though that if earnings continue to decline, the dividend could be at risk. It's not that we think Amot Investment is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that in mind though, if the poor dividend characteristics of Amot Investment don't faze you, it's worth being mindful of the risks involved with this business. We've identified 4 warning signs with Amot Investment (at least 1 which is a bit concerning), and understanding them should be part of your investment process.

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.