Should Income Investors Look At Hiron-Trade Investments & Industrial Buildings Ltd (TLV:HRON) Before Its Ex-Dividend?

Hiron-Trade Investments & Industrial Buildings Ltd (TLV:HRON) is about to trade ex-dividend in the next 3 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. Thus, you can purchase Hiron-Trade Investments & Industrial Buildings' shares before the 20th of June in order to receive the dividend, which the company will pay on the 10th of July.

The company's next dividend payment will be ₪20.00 per share, on the back of last year when the company paid a total of ₪40.00 to shareholders. Based on the last year's worth of payments, Hiron-Trade Investments & Industrial Buildings has a trailing yield of 2.0% on the current stock price of ₪2040.00. 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! So we need to investigate whether Hiron-Trade Investments & Industrial Buildings can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Hiron-Trade Investments & Industrial Buildings

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Hiron-Trade Investments & Industrial Buildings paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Hiron-Trade Investments & Industrial Buildings generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.

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 Hiron-Trade Investments & Industrial Buildings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Hiron-Trade Investments & Industrial Buildings's earnings per share have fallen at approximately 5.7% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hiron-Trade Investments & Industrial Buildings has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

Is Hiron-Trade Investments & Industrial Buildings an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. All things considered, we are not particularly enthused about Hiron-Trade Investments & Industrial Buildings from a dividend perspective.

While it's tempting to invest in Hiron-Trade Investments & Industrial Buildings for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 2 warning signs for Hiron-Trade Investments & Industrial Buildings you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com