Readers hoping to buy I.B.I. Investment House Ltd (TLV:IBI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase I.B.I. Investment House's shares on or after the 27th of August, you won't be eligible to receive the dividend, when it is paid on the 3rd of September.
The company's upcoming dividend is ₪3.53617 a share, following on from the last 12 months, when the company distributed a total of ₪11.47 per share to shareholders. Last year's total dividend payments show that I.B.I. Investment House has a trailing yield of 2.7% on the current share price of ₪421.40. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. I.B.I. Investment House paid out 114% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
View our latest analysis for I.B.I. Investment House
Click here to see how much of its profit I.B.I. Investment House paid out over the last 12 months.
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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see I.B.I. Investment House's earnings have been skyrocketing, up 24% 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. In the past 10 years, I.B.I. Investment House has increased its dividend at approximately 22% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
Final Takeaway
From a dividend perspective, should investors buy or avoid I.B.I. Investment House? We're not enthused to see I.B.I. Investment House's dividend was not well covered by earnings over the last year, although it is great to see earnings growing. At best we would put it on a watch-list to see if business conditions improve, as it doesn't look like a clear opportunity right now.
With that being said, if dividends aren't your biggest concern with I.B.I. Investment House, you should know about the other risks facing this business. To help with this, we've discovered 2 warning signs for I.B.I. Investment House that you should be aware of before investing in their shares.
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.