Dividend Investors: Don't Be Too Quick To Buy O.R.T. Technologies Ltd (TLV:ORTC) For Its Upcoming Dividend

O.R.T. Technologies Ltd (TLV:ORTC) stock is about to trade ex-dividend in 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, O.R.T. Technologies investors that purchase the stock on or after the 1st of May will not receive the dividend, which will be paid on the 21st of May.

The company's next dividend payment will be ₪0.50 per share, and in the last 12 months, the company paid a total of ₪1.00 per share. Last year's total dividend payments show that O.R.T. Technologies has a trailing yield of 6.9% on the current share price of ₪14.47. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for O.R.T. Technologies

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. O.R.T. Technologies's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable.

Click here to see how much of its profit O.R.T. Technologies 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. O.R.T. Technologies was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. O.R.T. Technologies has delivered 7.3% dividend growth per year on average over the past nine years.

Remember, you can always get a snapshot of O.R.T. Technologies's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

From a dividend perspective, should investors buy or avoid O.R.T. Technologies? We're a bit uncomfortable with it paying a dividend while being loss-making, especially given that the dividend was not well covered by free cash flow. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

With that being said, if you're still considering O.R.T. Technologies as an investment, you'll find it beneficial to know what risks this stock is facing. Be aware that O.R.T. Technologies is showing 4 warning signs in our investment analysis, and 2 of those are significant...

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.