Here's Why We're Wary Of Buying Levinstein Properties' (TLV:LVPR) For Its Upcoming Dividend

It looks like Levinstein Properties Ltd (TLV:LVPR) is about to go ex-dividend in the next 3 days. You can purchase shares before the 28th of February in order to receive the dividend, which the company will pay on the 8th of March.

Levinstein Properties's upcoming dividend is ₪1.00 a share, following on from the last 12 months, when the company distributed a total of ₪1.50 per share to shareholders. Last year's total dividend payments show that Levinstein Properties has a trailing yield of 2.2% on the current share price of ₪68.68. If you buy this business for its dividend, you should have an idea of whether Levinstein Properties's dividend is reliable and sustainable. So we need to investigate whether Levinstein Properties can afford its dividend, and if the dividend could grow.

View our latest analysis for Levinstein Properties

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. Levinstein Properties paid out 91% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. 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. Over the last year, it paid out more than three-quarters (79%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's good to see that while Levinstein Properties's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

Click here to see how much of its profit Levinstein Properties 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. If earnings fall far enough, the company could be forced to cut its dividend. Levinstein Properties's earnings per share have fallen at approximately 27% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Levinstein Properties has seen its dividend decline 3.0% per annum on average over the past 10 years, which is not great to see. 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.

To Sum It Up

Is Levinstein Properties an attractive dividend stock, or better left on the shelf? It's never fun to see a company's earnings per share in retreat. Additionally, Levinstein Properties is paying out quite a high percentage of its earnings, and more than half its cash flow, so it's hard to evaluate whether the company is reinvesting enough in its business to improve its situation. Bottom line: Levinstein Properties has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that in mind though, if the poor dividend characteristics of Levinstein Properties don't faze you, it's worth being mindful of the risks involved with this business. For example, Levinstein Properties has 4 warning signs (and 2 which are potentially serious) we think you should know about.

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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