Three Days Left To Buy Telsys Ltd. (TLV:TLSY) Before The Ex-Dividend Date

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Telsys Ltd. (TLV:TLSY) is about to go ex-dividend in just 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. In other words, investors can purchase Telsys' shares before the 16th of June in order to be eligible for the dividend, which will be paid on the 1st of July.

The company's next dividend payment will be ₪2.2098722 per share. Last year, in total, the company distributed ₪13.81 to shareholders. Calculating the last year's worth of payments shows that Telsys has a trailing yield of 7.9% on the current share price of ₪174.60. If you buy this business for its dividend, you should have an idea of whether Telsys's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Telsys

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Its dividend payout ratio is 85% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out more than three-quarters (84%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

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 Telsys 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Telsys's earnings have been skyrocketing, up 26% per annum for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.

Telsys also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Telsys has delivered an average of 37% per year annual increase in its dividend, based on the past five years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has Telsys got what it takes to maintain its dividend payments? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see Telsys's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 85% and 84% respectively. In summary, while it has some positive characteristics, we're not inclined to race out and buy Telsys today.

In light of that, while Telsys has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for Telsys that you should be aware of before investing in their shares.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.