It Might Not Be A Great Idea To Buy I.B.I.- Managing & Underwriting Ltd (TLV:IBIU) For Its Next Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see I.B.I.- Managing & Underwriting Ltd (TLV:IBIU) is about to trade ex-dividend in the next 2 days. The ex-dividend date is one business day before a company's record date, 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. This means that investors who purchase I.B.I.- Managing & Underwriting's shares on or after the 26th of November will not receive the dividend, which will be paid on the 5th of December.

The company's next dividend payment will be ₪0.08037 per share. Last year, in total, the company distributed ₪0.32 to shareholders. Calculating the last year's worth of payments shows that I.B.I.- Managing & Underwriting has a trailing yield of 4.7% on the current share price of ₪6.80. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for I.B.I.- Managing & Underwriting

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. I.B.I.- Managing & Underwriting paid out 61% of its earnings to investors last year, a normal payout level for most businesses.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. I.B.I.- Managing & Underwriting's earnings per share have fallen at approximately 11% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

I.B.I.- Managing & Underwriting also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. 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 has seen its dividend decline 46% per annum on average over the past three years, which is not great to see. 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

From a dividend perspective, should investors buy or avoid I.B.I.- Managing & Underwriting? We're not overly enthused to see I.B.I.- Managing & Underwriting's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. 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 help with this, we've discovered 4 warning signs for I.B.I.- Managing & Underwriting (1 shouldn't be ignored!) that you ought to be aware of before buying the 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.