Do These 3 Checks Before Buying Adgar Investments and Development Ltd (TLV:ADGR) For Its Upcoming Dividend

By
Simply Wall St
Published
March 21, 2022
TASE:ADGR
Source: Shutterstock

Adgar Investments and Development Ltd (TLV:ADGR) stock is about to trade ex-dividend in 2 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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 Adgar Investments and Development's shares on or after the 24th of March will not receive the dividend, which will be paid on the 3rd of April.

The company's next dividend payment will be ₪0.092 per share, on the back of last year when the company paid a total of ₪0.33 to shareholders. Based on the last year's worth of payments, Adgar Investments and Development stock has a trailing yield of around 4.3% on the current share price of ₪7.572. 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! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Adgar Investments and Development

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. Adgar Investments and Development paid out a comfortable 27% of its profit last year. 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. Dividends consumed 53% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Adgar Investments and Development'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 Adgar Investments and Development paid out over the last 12 months.

historic-dividend
TASE:ADGR Historic Dividend March 21st 2022

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. It's encouraging to see Adgar Investments and Development has grown its earnings rapidly, up 29% a year for 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. Since the start of our data, 10 years ago, Adgar Investments and Development has lifted its dividend by approximately 2.0% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Adgar Investments and Development is keeping back more of its profits to grow the business.

To Sum It Up

From a dividend perspective, should investors buy or avoid Adgar Investments and Development? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Adgar Investments and Development for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 4 warning signs for Adgar Investments and Development (2 are a bit concerning!) 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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