Income Investors Should Know That Tadiran Holdings Ltd (TLV:TDRN) Goes Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Tadiran Holdings Ltd (TLV:TDRN) is about to trade ex-dividend in the next two days. You will need to purchase shares before the 15th of March to receive the dividend, which will be paid on the 22nd of March.

Tadiran Holdings's next dividend payment will be ₪5.87 per share, and in the last 12 months, the company paid a total of ₪8.62 per share. Based on the last year's worth of payments, Tadiran Holdings stock has a trailing yield of around 2.5% on the current share price of ₪345. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Tadiran Holdings can afford its dividend, and if the dividend could grow.

See our latest analysis for Tadiran Holdings

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. Tadiran Holdings paid out more than half (73%) of its earnings last year, which is a regular payout ratio for most companies. 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. Luckily it paid out just 23% of its free cash flow last year.

It's positive to see that Tadiran Holdings'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 Tadiran Holdings 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 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 Tadiran Holdings, with earnings per share up 6.2% on average over the last five years. Decent historical earnings per share growth suggests Tadiran Holdings has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Tadiran Holdings has lifted its dividend by approximately 26% 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.

To Sum It Up

Is Tadiran Holdings an attractive dividend stock, or better left on the shelf? While earnings per share growth has been modest, Tadiran Holdings's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. In summary, while it has some positive characteristics, we're not inclined to race out and buy Tadiran Holdings today.

While it's tempting to invest in Tadiran Holdings for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Tadiran Holdings and you should be aware of these before buying any shares.

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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