Should You Buy Harel Insurance Investments & Financial Services Ltd (TLV:HARL) For Its Upcoming Dividend?
Harel Insurance Investments & Financial Services Ltd (TLV:HARL) is about to trade ex-dividend in the next three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Harel Insurance Investments & Financial Services' shares on or after the 3rd of September will not receive the dividend, which will be paid on the 16th of September.
The company's next dividend payment will be ₪1.95 per share. Last year, in total, the company distributed ₪5.14 to shareholders. Looking at the last 12 months of distributions, Harel Insurance Investments & Financial Services has a trailing yield of approximately 2.7% on its current stock price of ₪192.00. If you buy this business for its dividend, you should have an idea of whether Harel Insurance Investments & Financial Services's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. That's why it's good to see Harel Insurance Investments & Financial Services paying out a modest 43% of its earnings.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Check out our latest analysis for Harel Insurance Investments & Financial Services
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Harel Insurance Investments & Financial Services's earnings have been skyrocketing, up 36% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Harel Insurance Investments & Financial Services has lifted its dividend by approximately 18% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
To Sum It Up
Is Harel Insurance Investments & Financial Services worth buying for its dividend? Companies like Harel Insurance Investments & Financial Services that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Harel Insurance Investments & Financial Services more closely.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 1 warning sign with Harel Insurance Investments & Financial Services and understanding them should be part of your investment process.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.