Why It Might Not Make Sense To Buy Bayside Land Corporation Ltd (TLV:BYSD) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Bayside Land Corporation Ltd (TLV:BYSD) is about to trade ex-dividend in the next three days. This means that investors who purchase shares on or after the 11th of February will not receive the dividend, which will be paid on the 21st of February.

The upcoming dividend for Bayside Land is ₪1.22 per share, increased from last year's total dividends per share of ₪0.94. If you buy this business for its dividend, you should have an idea of whether Bayside Land's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Bayside Land

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. It paid out 77% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline.

Click here to see how much of its profit Bayside Land 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see Bayside Land's earnings per share have been shrinking at 2.4% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bayside Land's dividend payments per share have declined at 2.0% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Bayside Land? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. 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 on the fence about its dividend prospects.

If you want to look further into Bayside Land, it's worth knowing the risks this business faces. Be aware that Bayside Land is showing 4 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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