Should you buy Plasson Industries Ltd (TLV: PLSN) for its next dividend?

Readers wishing to buy Plasson Industries Ltd. (TLV: PLSN) for its dividend will have to act shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company’s registration date, which is the date the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because every time a stock is bought or sold, the transaction takes at least two business days to settle. Thus, you can buy Plasson Industries shares before December 6 in order to receive the dividend that the company will pay on December 16.

The company’s next dividend payment will be 3.00 per share. Last year, in total, the company distributed 6.00 yen to shareholders. Based on the value of last year’s payouts, Plasson Industries has a sliding return of 2.8% on the current share price of 213.2. If you are buying this company for its dividend, you should know if Plasson Industries’ dividend is reliable and sustainable. It is therefore necessary to check whether dividend payments are covered and whether profits are growing.

Check out our latest review for Plasson Industries

Dividends are usually paid out of the company’s profits, so if a company pays more than it earned, its dividend is usually at risk of being reduced. Plasson Industries paid a comfortable 35% of its profit last year. Yet cash flow is still more important than earnings in valuing a dividend, so we need to see if the company has generated enough cash to pay for its distribution. Fortunately, she has only paid out 47% of her free cash flow in the past year.

It is encouraging to see that the dividend is covered by both earnings and cash flow. This usually suggests that the dividend is sustainable, as long as profits don’t drop sharply.

Click here to see how much of its profits Plasson Industries has paid in the last 12 months.

TASE: Historic PLSN dividend December 2, 2021

Have profits and dividends increased?

Companies with strong growth prospects generally make the best dividend payers because dividends are easier to grow when earnings per share improve. If profits fall enough, the company could be forced to cut its dividend. This is why it is heartwarming to see Plasson Industries’ profits soar, rising 22% per year over the past five years. Plasson Industries pays less than half of its profits and cash flow, while simultaneously increasing earnings per share at a rapid rate. This is a very favorable combination which can often lead to a multiplication of the dividend in the long run, if profits increase and the company pays out a higher percentage of its profits.

Most investors will primarily assess a company’s dividend prospects by checking the historical rate of dividend growth. Plasson Industries has generated dividend growth of 7.2% per year on average over the past 10 years. It’s encouraging to see the company raising its dividends as profits rise, suggesting at least some corporate interest in rewarding shareholders.

To summarize

Is Plasson Industries an attractive dividend-paying stock, or better still, is it left on the shelf? Plasson Industries increased its earnings per share while reinvesting in the business. Unfortunately, the dividend has been reduced at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There is a lot to like about Plasson Industries, and we would prioritize taking a closer look.

So, even though Plasson Industries looks good from a dividend standpoint, it’s still worth being aware of the risks inherent in this stock. In terms of investment risks, we have identified 1 warning sign with Plasson Industries and understanding them should be part of your investment process.

A common investment mistake is to buy the first interesting stock you see. Here you will find a list of promising dividend paying stocks with a yield above 2% and an upcoming dividend.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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