Should You Buy Duniec Bros. Ltd. (TLV:DUNI) 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 Duniec Bros. Ltd. (TLV:DUNI) is about to trade ex-dividend in the next three days. Investors can purchase shares before the 8th of December in order to be eligible for this dividend, which will be paid on the 21st of December.

Duniec Bros's next dividend payment will be ₪1.00 per share, and in the last 12 months, the company paid a total of ₪6.00 per share. Last year's total dividend payments show that Duniec Bros has a trailing yield of 4.7% on the current share price of ₪127.9. If you buy this business for its dividend, you should have an idea of whether Duniec Bros's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Duniec Bros

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. Duniec Bros paid out 65% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 24% of its free cash flow in the last year.

It's positive to see that Duniec Bros'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 Duniec Bros paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 comforting to see Duniec Bros's earnings have been skyrocketing, up 24% per annum for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. With a reasonable payout ratio, profits being reinvested, and some earnings growth, Duniec Bros could have strong prospects for future increases to the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Duniec Bros has delivered an average of 25% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy Duniec Bros for the upcoming dividend? We like Duniec Bros's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about Duniec Bros, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Duniec Bros is facing. Our analysis shows 4 warning signs for Duniec Bros that we strongly recommend you have a look at before investing in the company.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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