There's A Lot To Like About Overseas Commerce's (TLV:OVRS) Upcoming ₪0.0678017 Dividend
Readers hoping to buy Overseas Commerce Ltd. (TLV:OVRS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Overseas Commerce's shares before the 20th of August in order to receive the dividend, which the company will pay on the 8th of September.
The company's next dividend payment will be ₪0.0678017 per share. Last year, in total, the company distributed ₪0.14 to shareholders. Based on the last year's worth of payments, Overseas Commerce stock has a trailing yield of around 2.5% on the current share price of ₪5.872. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Overseas Commerce can afford its dividend, and if the dividend could grow.
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. That's why it's good to see Overseas Commerce paying out a modest 50% of its 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. The good news is it paid out just 16% of its free cash flow in the last year.
It's positive to see that Overseas Commerce'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 Overseas Commerce
Click here to see how much of its profit Overseas Commerce 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Overseas Commerce earnings per share are up 5.9% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. 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.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Overseas Commerce's dividend payments per share have declined at 9.8% per year on average over the past nine years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Is Overseas Commerce worth buying for its dividend? Earnings per share have been growing moderately, and Overseas Commerce is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Overseas Commerce is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.
So while Overseas Commerce looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Be aware that Overseas Commerce is showing 3 warning signs in our investment analysis, and 1 of those is concerning...
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.