It Might Not Be A Great Idea To Buy Amot Investments Ltd. (TLV:AMOT) For Its Next Dividend

Readers hoping to buy Amot Investments Ltd. (TLV:AMOT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days 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 Amot Investments' shares on or after the 25th of May, you won't be eligible to receive the dividend, when it is paid on the 11th of June.

The company's next dividend payment will be ₪0.27 per share. Last year, in total, the company distributed ₪1.31 to shareholders. Looking at the last 12 months of distributions, Amot Investments has a trailing yield of approximately 6.5% on its current stock price of ₪20.11. If you buy this business for its dividend, you should have an idea of whether Amot Investments's dividend is reliable and sustainable. As a result, readers should always check whether Amot Investments has been able to grow its dividends, or if the dividend might be cut.

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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. Amot Investments paid out more than half (55%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Amot Investments generated enough free cash flow to afford its dividend. Dividends consumed 60% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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.

Check out our latest analysis for Amot Investments

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see Amot Investments's earnings per share have dropped 8.0% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Amot Investments has delivered an average of 6.8% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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 Investments? While earnings per share are shrinking, it's encouraging to see that at least Amot Investments's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Amot Investments.

Although, if you're still interested in Amot Investments and want to know more, you'll find it very useful to know what risks this stock faces. To help with this, we've discovered 3 warning signs for Amot Investments (1 is significant!) that you ought to be aware of before buying the shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.