Four Days Left Until E & M Computing Ltd. (TLV:EMCO) Trades Ex-Dividend

It looks like E & M Computing Ltd. (TLV:EMCO) is about to go ex-dividend in the next four days. Typically, the ex-dividend date is two business days 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. Meaning, you will need to purchase E & M Computing's shares before the 5th of June to receive the dividend, which will be paid on the 23rd of June.

The company's next dividend payment will be ₪0.08 per share. Last year, in total, the company distributed ₪0.28 to shareholders. Looking at the last 12 months of distributions, E & M Computing has a trailing yield of approximately 3.0% on its current stock price of ₪9.324. 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! As a result, readers should always check whether E & M Computing has been able to grow its dividends, or if the dividend might be cut.

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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. Fortunately E & M Computing's payout ratio is modest, at just 49% of profit. 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. Thankfully its dividend payments took up just 32% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that E & M Computing'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.

Check out our latest analysis for E & M Computing

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?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by E & M Computing's 7.0% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

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 4.7% per year on average over the past 10 years, which is uninspiring. 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.

The Bottom Line

Is E & M Computing worth buying for its dividend? E & M Computing has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, it's hard to get excited about E & M Computing from a dividend perspective.

In light of that, while E & M Computing has an appealing dividend, it's worth knowing the risks involved with this stock. To that end, you should learn about the 3 warning signs we've spotted with E & M Computing (including 1 which can't be ignored).

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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.