Is It Worth Considering Meshulam Levinstein Contracting & Engineering Ltd. (TLV:LEVI) For Its Upcoming Dividend?

Meshulam Levinstein Contracting & Engineering Ltd. (TLV:LEVI) is about to trade ex-dividend in the next four 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Meshulam Levinstein Contracting & Engineering's shares on or after the 28th of August will not receive the dividend, which will be paid on the 4th of September.

The company's next dividend payment will be ₪2.00 per share, and in the last 12 months, the company paid a total of ₪5.00 per share. Looking at the last 12 months of distributions, Meshulam Levinstein Contracting & Engineering has a trailing yield of approximately 1.4% on its current stock price of ₪352.30. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Meshulam Levinstein Contracting & Engineering has been able to grow its dividends, or if the dividend might be cut.

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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. Meshulam Levinstein Contracting & Engineering is paying out just 23% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It paid out 99% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

While Meshulam Levinstein Contracting & Engineering's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Meshulam Levinstein Contracting & Engineering's ability to maintain its dividend.

Check out our latest analysis for Meshulam Levinstein Contracting & Engineering

Click here to see how much of its profit Meshulam Levinstein Contracting & Engineering paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're not enthused to see that Meshulam Levinstein Contracting & Engineering's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Meshulam Levinstein Contracting & Engineering has delivered 2.3% dividend growth per year on average over the past 10 years.

To Sum It Up

Should investors buy Meshulam Levinstein Contracting & Engineering for the upcoming dividend? Earnings per share have barely grown in this time, and although Meshulam Levinstein Contracting & Engineering is paying out a low percentage of its profit, its dividend was not well covered by free cash flow. Only rarely do we find companies paying out a low percentage of their profits yet a high percentage of their cash flow, so we'd mark this as a concern. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

However if you're still interested in Meshulam Levinstein Contracting & Engineering as a potential investment, you should definitely consider some of the risks involved with Meshulam Levinstein Contracting & Engineering. For instance, we've identified 2 warning signs for Meshulam Levinstein Contracting & Engineering (1 is a bit unpleasant) you should be aware of.

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.