Should You Buy Tiv Taam Holdings 1 Ltd. (TLV:TTAM) For Its Upcoming Dividend?
It looks like Tiv Taam Holdings 1 Ltd. (TLV:TTAM) is about to go ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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, Tiv Taam Holdings 1 investors that purchase the stock on or after the 9th of September will not receive the dividend, which will be paid on the 24th of September.
The company's upcoming dividend is ₪0.0714789 a share, following on from the last 12 months, when the company distributed a total of ₪0.21 per share to shareholders. Based on the last year's worth of payments, Tiv Taam Holdings 1 has a trailing yield of 1.6% on the current stock price of ₪12.92. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Tiv Taam Holdings 1 can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Tiv Taam Holdings 1's payout ratio is modest, at just 30% of profit. 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. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.
It's positive to see that Tiv Taam Holdings 1's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
See our latest analysis for Tiv Taam Holdings 1
Click here to see how much of its profit Tiv Taam Holdings 1 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Tiv Taam Holdings 1 earnings per share are up 5.9% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Tiv Taam Holdings 1 has lifted its dividend by approximately 18% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Is Tiv Taam Holdings 1 an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Tiv Taam Holdings 1 is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Tiv Taam Holdings 1 is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.
Keen to explore more data on Tiv Taam Holdings 1's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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.