E & M Computing Ltd. (TLV:EMCO) Is About To Go Ex-Dividend, And It Pays A 3.1% Yield

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see E & M Computing Ltd. (TLV:EMCO) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase E & M Computing's shares before the 4th of September in order to receive the dividend, which the company will pay on the 19th of September.

The company's next dividend payment will be ₪0.025 per share. Last year, in total, the company distributed ₪0.27 to shareholders. Based on the last year's worth of payments, E & M Computing has a trailing yield of 3.1% on the current stock price of ₪8.676. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for E & M Computing

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. E & M Computing is paying out an acceptable 62% of its profit, a common payout level among 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. It paid out 16% 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 E & M Computing paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. E & M Computing's earnings per share have fallen at approximately 14% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. E & M Computing's dividend payments per share have declined at 0.7% per year on average over the past 10 years, which is uninspiring.

To Sum It Up

Is E & M Computing an attractive dividend stock, or better left on the shelf? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. In summary, it's hard to get excited about E & M Computing from a dividend perspective.

If you want to look further into E & M Computing, it's worth knowing the risks this business faces. To that end, you should learn about the 3 warning signs we've spotted with E & M Computing (including 1 which is a bit concerning).

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.