Income Investors Should Know That Unitronics (1989) (R"G) Ltd (TLV:UNIT) Goes Ex-Dividend Soon

Unitronics (1989) (R"G) Ltd (TLV:UNIT) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days 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 can take two business days or more to settle. This means that investors who purchase Unitronics (1989) (RG)'s shares on or after the 3rd of June will not receive the dividend, which will be paid on the 3rd of July.

The company's upcoming dividend is ₪1.5038194 a share, following on from the last 12 months, when the company distributed a total of ₪2.30 per share to shareholders. Based on the last year's worth of payments, Unitronics (1989) (RG) stock has a trailing yield of around 8.2% on the current share price of ₪27.89. 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! So we need to investigate whether Unitronics (1989) (RG) can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. Fortunately Unitronics (1989) (RG)'s payout ratio is modest, at just 42% of profit. 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. Unitronics (1989) (RG) paid out more free cash flow than it generated - 151%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Unitronics (1989) (RG) paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Unitronics (1989) (RG) to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

View our latest analysis for Unitronics (1989) (RG)

Click here to see how much of its profit Unitronics (1989) (RG) 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. It's encouraging to see Unitronics (1989) (RG) has grown its earnings rapidly, up 36% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, four years ago, Unitronics (1989) (RG) has lifted its dividend by approximately 33% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Should investors buy Unitronics (1989) (RG) for the upcoming dividend? We like that Unitronics (1989) (RG) has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. In summary, while it has some positive characteristics, we're not inclined to race out and buy Unitronics (1989) (RG) today.

On that note, you'll want to research what risks Unitronics (1989) (RG) is facing. To that end, you should learn about the 2 warning signs we've spotted with Unitronics (1989) (RG) (including 1 which can't be ignored).

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.