Should You Buy Fridenson Logistic Services Ltd (TLV:FRDN) For Its Upcoming Dividend?

Explore Fridenson Logistic Services's Fair Values from the Community and select yours

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Fridenson Logistic Services Ltd (TLV:FRDN) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Therefore, if you purchase Fridenson Logistic Services' shares on or after the 21st of August, you won't be eligible to receive the dividend, when it is paid on the 3rd of September.

The company's upcoming dividend is ₪0.919224 a share, following on from the last 12 months, when the company distributed a total of ₪1.61 per share to shareholders. Calculating the last year's worth of payments shows that Fridenson Logistic Services has a trailing yield of 2.8% on the current share price of ₪56.97. If you buy this business for its dividend, you should have an idea of whether Fridenson Logistic Services's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. Fridenson Logistic Services paid out just 22% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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.

View our latest analysis for Fridenson Logistic Services

Click here to see how much of its profit Fridenson Logistic Services paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Fridenson Logistic Services's earnings per share have risen 20% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Fridenson Logistic Services's dividend payments per share have declined at 2.7% per year on average over the past 10 years, which is uninspiring. Fridenson Logistic Services is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Should investors buy Fridenson Logistic Services for the upcoming dividend? It's great that Fridenson Logistic Services is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Fridenson Logistic Services is facing. For example, we've found 2 warning signs for Fridenson Logistic Services that we recommend you consider before investing in the business.

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.