Do These 3 Checks Before Buying I.B.I.- Managing & Underwriting Ltd (TLV:IBIU) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that I.B.I.- Managing & Underwriting Ltd (TLV:IBIU) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase I.B.I.- Managing & Underwriting's shares on or after the 18th of November, you won't be eligible to receive the dividend, when it is paid on the 26th of November.

The company's upcoming dividend is ₪0.4436416 a share, following on from the last 12 months, when the company distributed a total of ₪0.85 per share to shareholders. Based on the last year's worth of payments, I.B.I.- Managing & Underwriting stock has a trailing yield of around 7.3% on the current share price of ₪11.56. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Last year I.B.I.- Managing & Underwriting paid out 101% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.

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.

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?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by I.B.I.- Managing & Underwriting's 8.2% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

We'd also point out that I.B.I.- Managing & Underwriting issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. I.B.I.- Managing & Underwriting's dividend payments per share have declined at 20% per year on average over the past four years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

To Sum It Up

Should investors buy I.B.I.- Managing & Underwriting for the upcoming dividend? Not only are earnings per share shrinking, but I.B.I.- Managing & Underwriting is paying out a disconcertingly high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Although, if you're still interested in I.B.I.- Managing & Underwriting and want to know more, you'll find it very useful to know what risks this stock faces. In terms of investment risks, we've identified 2 warning signs with I.B.I.- Managing & Underwriting and understanding them should be part of your investment process.

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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.