Matrix IT Ltd. (TLV:MTRX) Passed Our Checks, And It's About To Pay A ₪0.64 Dividend

Matrix IT Ltd. (TLV:MTRX) is about to trade ex-dividend in the next two days. You will need to purchase shares before the 18th of March to receive the dividend, which will be paid on the 30th of March.

Matrix IT's next dividend payment will be ₪0.64 per share, and in the last 12 months, the company paid a total of ₪1.94 per share. Looking at the last 12 months of distributions, Matrix IT has a trailing yield of approximately 2.4% on its current stock price of ₪80.5. If you buy this business for its dividend, you should have an idea of whether Matrix IT's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Matrix IT

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Matrix IT paid out more than half (72%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 25% of the free cash flow it generated, which is a comfortable payout ratio.

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 Matrix IT 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Matrix IT's earnings per share have been growing at 11% a year for the past five years. Matrix IT has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Matrix IT has lifted its dividend by approximately 10% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

From a dividend perspective, should investors buy or avoid Matrix IT? We like Matrix IT's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

In light of that, while Matrix IT has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 2 warning signs with Matrix IT and understanding them should be part of your investment process.

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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