Be Sure To Check Out Delta Israel Brands Ltd (TLV:DLTI) Before It Goes Ex-Dividend

Delta Israel Brands Ltd (TLV:DLTI) is about to trade ex-dividend in the next 2 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Delta Israel Brands' shares on or after the 21st of August, you won't be eligible to receive the dividend, when it is paid on the 1st of September.

The company's next dividend payment will be ₪8.00 per share. Last year, in total, the company distributed ₪2.32 to shareholders. Based on the last year's worth of payments, Delta Israel Brands stock has a trailing yield of around 3.4% on the current share price of ₪68.59. If you buy this business for its dividend, you should have an idea of whether Delta Israel Brands's dividend is reliable and sustainable. As a result, readers should always check whether Delta Israel Brands has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Delta Israel Brands

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Delta Israel Brands paid out a comfortable 39% of its profit last year. 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. Fortunately, it paid out only 44% of its free cash flow in the past year.

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 Delta Israel Brands 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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Delta Israel Brands, with earnings per share up 9.9% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, three years ago, Delta Israel Brands has lifted its dividend by approximately 60% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Has Delta Israel Brands got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Delta Israel Brands is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Delta Israel Brands is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

While it's tempting to invest in Delta Israel Brands for the dividends alone, you should always be mindful of the risks involved. In terms of investment risks, we've identified 1 warning sign with Delta Israel Brands and understanding them should be part of your investment process.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.