Just Three Days Till Birman Wood & Hardware Ltd (TLV:BIRM) Will Be Trading Ex-Dividend
Birman Wood & Hardware Ltd (TLV:BIRM) stock is about to trade ex-dividend in 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. This means that investors who purchase Birman Wood & Hardware's shares on or after the 15th of September will not receive the dividend, which will be paid on the 30th of September.
The company's next dividend payment will be ₪0.545466 per share, on the back of last year when the company paid a total of ₪0.59 to shareholders. Looking at the last 12 months of distributions, Birman Wood & Hardware has a trailing yield of approximately 5.9% on its current stock price of ₪9.99. 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! As a result, readers should always check whether Birman Wood & Hardware has been able to grow its dividends, or if the dividend might be cut.
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 Birman Wood & Hardware's payout ratio is modest, at just 45% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 9.4% of its free cash flow in the last year.
It's positive to see that Birman Wood & Hardware'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.
View our latest analysis for Birman Wood & Hardware
Click here to see how much of its profit Birman Wood & Hardware paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Birman Wood & Hardware's earnings per share have fallen at approximately 6.1% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Birman Wood & Hardware has seen its dividend decline 6.3% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
To Sum It Up
Is Birman Wood & Hardware an attractive dividend stock, or better left on the shelf? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
In light of that, while Birman Wood & Hardware has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 5 warning signs for Birman Wood & Hardware that we strongly recommend you have a look at before investing in the company.
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.