Be Sure To Check Out Prashkovsky Investments and Construction Ltd. (TLV:PRSK) Before It Goes Ex-Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Prashkovsky Investments and Construction Ltd. (TLV:PRSK) is about to go ex-dividend in just three days. Ex-dividend means that investors that purchase the stock on or after the 30th of November will not receive this dividend, which will be paid on the 8th of December.

Prashkovsky Investments and Construction's next dividend payment will be ₪1.01 per share, on the back of last year when the company paid a total of ₪3.40 to shareholders. Based on the last year's worth of payments, Prashkovsky Investments and Construction has a trailing yield of 4.4% on the current stock price of ₪76.7. If you buy this business for its dividend, you should have an idea of whether Prashkovsky Investments and Construction's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Prashkovsky Investments and Construction

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. That's why it's good to see Prashkovsky Investments and Construction paying out a modest 27% of its earnings. 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. It paid out 88% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

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 Prashkovsky Investments and Construction paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 Prashkovsky Investments and Construction's earnings have been skyrocketing, up 72% per annum for the past five years.

Prashkovsky Investments and Construction also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Prashkovsky Investments and Construction has increased its dividend at approximately 12% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Prashkovsky Investments and Construction worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Prashkovsky Investments and Construction paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

While it's tempting to invest in Prashkovsky Investments and Construction for the dividends alone, you should always be mindful of the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Prashkovsky Investments and Construction (including 1 which can't be ignored).

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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