Interested In Unitronics (1989) (RG)'s (TLV:UNIT) Upcoming ₪0.5738112 Dividend? You Have Three Days Left

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Unitronics (1989) (R"G) Ltd (TLV:UNIT) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Unitronics (1989) (RG)'s shares before the 25th of August in order to receive the dividend, which the company will pay on the 19th of September.

The company's next dividend payment will be ₪0.5738112 per share, and in the last 12 months, the company paid a total of ₪1.87 per share. Looking at the last 12 months of distributions, Unitronics (1989) (RG) has a trailing yield of approximately 5.9% on its current stock price of ₪31.67. If you buy this business for its dividend, you should have an idea of whether Unitronics (1989) (RG)'s dividend is reliable and sustainable. As a result, readers should always check whether Unitronics (1989) (RG) has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Unitronics (1989) (RG)

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. It paid out 76% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings. 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. Over the past year it paid out 124% of its free cash flow as dividends, which is uncomfortably 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.

While Unitronics (1989) (RG)'s dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its 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.

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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Unitronics (1989) (RG) has grown its earnings rapidly, up 42% 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past three years, Unitronics (1989) (RG) has increased its dividend at approximately 37% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Has Unitronics (1989) (RG) got what it takes to maintain its dividend payments? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 124% of its cashflow, which is uncomfortably high. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So if you want to do more digging on Unitronics (1989) (RG), you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 1 warning sign for Unitronics (1989) (RG) you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.