Is It Smart To Buy Hiron-Trade Investments & Industrial Buildings Ltd (TLV:HRON) Before It Goes Ex-Dividend?

Readers hoping to buy Hiron-Trade Investments & Industrial Buildings Ltd (TLV:HRON) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 20th of December in order to be eligible for this dividend, which will be paid on the 5th of January.

Hiron-Trade Investments & Industrial Buildings's upcoming dividend is ₪10.00 a share, following on from the last 12 months, when the company distributed a total of ₪20.00 per share to shareholders. Looking at the last 12 months of distributions, Hiron-Trade Investments & Industrial Buildings has a trailing yield of approximately 1.2% on its current stock price of ₪1714.2. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Hiron-Trade Investments & Industrial Buildings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hiron-Trade Investments & Industrial Buildings paid out just 11% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. It paid out 8.2% of its free cash flow as dividends last year, which is conservatively low.

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?

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Hiron-Trade Investments & Industrial Buildings's earnings per share have risen 16% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Hiron-Trade Investments & Industrial Buildings's dividend payments are broadly unchanged compared to where they were 10 years ago.

Final Takeaway

Should investors buy Hiron-Trade Investments & Industrial Buildings for the upcoming dividend? It's great that Hiron-Trade Investments & Industrial Buildings is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

So while Hiron-Trade Investments & Industrial Buildings looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Hiron-Trade Investments & Industrial Buildings has 1 warning sign we think you should be aware of.

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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