Looks like Inrom Construction Industries Ltd (TLV:INRM) is set to go ex-dividend in the next 3 days. The ex-dividend date is usually one business day before the record date which is the latest date by which you must be present on the books of the company as a shareholder in order to receive the dividend. The ex-dividend date is an important date to know because any purchase of shares made on or after this date may mean late settlement which does not appear on the record date. This means that you will need to buy shares of Inrom Construction Industries before April 13 to receive the dividend, which will be paid on May 3.
The company’s next dividend is ₪0.11 per share, following the last 12 months, when the company distributed a total of ₪0.28 per share to shareholders. Based on last year’s payouts, Inrom Construction Industries has a yield of 1.9% on the current share price of ₪14.5. Dividends are a major contributor to investment returns for long-term holders, but only if the dividend continues to be paid. We therefore need to consider whether Inrom Construction Industries can afford its dividend and whether the dividend could increase.
See our latest analysis for Inrom Construction Industries
If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. Inrom Construction Industries shed a comfortable 28% of its profit last year. Still, cash flow is even more important than earnings in evaluating a dividend, so we need to see if the company has generated enough cash to pay its distribution. The good thing is that dividends were well covered by free cash flow, with the company paying out 23% of its free cash flow last year.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.
Click here to see how much profit Inrom Construction Industries has paid out over the last 12 months.
Have earnings and dividends increased?
When earnings decline, dividend companies become much more difficult to analyze and to own safely. If earnings fall and the company is forced to cut its dividend, investors could see the value of their investment go up in smoke. So we’re not too thrilled that Inrom Construction Industries’ profits have fallen 2.9% annually for the past five years.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Inrom Construction Industries has seen its dividend fall by 10% per year on average over the past seven years, which is not encouraging to see. While it’s not great that earnings and dividends per share have fallen in recent years, we’re encouraged that management has cut the dividend rather than risk overcommitting the company in a risky attempt to maintain shareholder returns.
Is Inrom Construction Industries worth buying for its dividend? Inrom Construction Industries has comfortably low cash and earnings payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Nevertheless, we consider the decline in earnings to be a warning sign. All things considered, we’re not particularly excited about Inrom Construction Industries from a dividend perspective.
In light of this, although Inrom Construction Industries has an attractive dividend, it is worth knowing the risks associated with this stock. Our analysis shows 3 warning signs for Inrom Construction Industries which we strongly recommend that you consult before investing in the company.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.