Why It Might Not Make Sense To Buy I.B.I.- Managing & Underwriting Ltd (TLV:IBIU) For Its Upcoming Dividend
Readers hoping to buy I.B.I.- Managing & Underwriting Ltd (TLV:IBIU) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Therefore, if you purchase I.B.I.- Managing & Underwriting's shares on or after the 27th of August, you won't be eligible to receive the dividend, when it is paid on the 7th of September.
The company's next dividend payment will be ₪0.421138 per share, on the back of last year when the company paid a total of ₪0.85 to shareholders. Based on the last year's worth of payments, I.B.I.- Managing & Underwriting has a trailing yield of 8.0% on the current stock price of ₪10.57. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. I.B.I.- Managing & Underwriting distributed an unsustainably high 166% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
See our latest analysis for I.B.I.- Managing & Underwriting
Click here to see how much of its profit I.B.I.- Managing & Underwriting paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 encouraged by the steady growth at I.B.I.- Managing & Underwriting, with earnings per share up 2.8% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. I.B.I.- Managing & Underwriting has seen its dividend decline 20% per annum on average over the past four years, which is not great to see. 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.
Final Takeaway
Is I.B.I.- Managing & Underwriting worth buying for its dividend? While we like that its earnings are growing somewhat, we're not enamored that it's paying out 166% of last year's earnings. I.B.I.- Managing & Underwriting doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
With that being said, if you're still considering I.B.I.- Managing & Underwriting as an investment, you'll find it beneficial to know what risks this stock is facing. To that end, you should learn about the 3 warning signs we've spotted with I.B.I.- Managing & Underwriting (including 1 which is a bit unpleasant).
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.