What is the likely impact on the company's valuation multiples (e.g., P/E, P/B) after the dividend is paid?

Impact on valuation multiples

When the NIS 20 million dividend is paid, the company’s cash and retained‑earnings on the balance sheet will fall by roughly the same amount. Consequently, the book value per share (used in the P/B ratio) will decline, so, all else equal, the P/B multiple will rise (the denominator is smaller). On the earnings side, the payout reduces retained earnings that could be reinvested, so future EPS is likely to be a touch lower. If the market price does not adjust immediately, the P/E ratio will also move higher because the price‑to‑earnings denominator shrinks while the share price remains unchanged.

Market dynamics and price adjustment

In practice, the market typically “prices‑in” the dividend on the ex‑dividend date: the share price drops by roughly the dividend amount (≈ NIS 20 million divided by the total shares outstanding). Assuming the dividend is modest relative to the firm’s market cap, the price correction will be small, but enough to offset the reduction in cash and equity. If the price falls by the dividend amount, the P/E and P/B ratios may stay roughly stable; however, any excess price decline (e.g., due to a broader market sell‑off or a perception that the payout is unsustainable) will push the multiples lower, creating a short‑term buying opportunity for value‑oriented traders.

Actionable insight

• Short‑term: Expect a modest, predictable price dip on the ex‑div date (≈ 2–3 % if the dividend is ~NIS 20 M). Traders can position for a quick rebound if the stock is oversold relative to its fundamentals.
  
• Medium‑term: Monitor post‑dividend EPS guidance. If the company signals that earnings will hold steady despite the payout, the P/E may normalize, supporting the current price level.
  
• Long‑term: A higher P/B after the dividend is not a red‑flag; it simply reflects the reduced equity base. As long as the firm’s cash‑flow generation remains strong, the elevated multiple is justified and the stock remains attractive for dividend‑seeking investors.