It Might Not Be A Great Idea To Buy I.B.I.- Managing & Underwriting Ltd (TLV:IBIU) For Its Next 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Meaning, you will need to purchase I.B.I.- Managing & Underwriting's shares before the 21st of August to receive the dividend, which will be paid on the 2nd of September.

The company's next dividend payment will be ₪0.2925462 per share, and in the last 12 months, the company paid a total of ₪0.85 per share. Based on the last year's worth of payments, I.B.I.- Managing & Underwriting has a trailing yield of 7.7% on the current stock price of ₪10.98. 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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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. I.B.I.- Managing & Underwriting paid out 99% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.

Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.

View 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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by I.B.I.- Managing & Underwriting's 12% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

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. It's hard to grow dividends per share when a company keeps creating new shares.

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 25% 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.

The Bottom Line

Should investors buy I.B.I.- Managing & Underwriting for the upcoming dividend? Earnings per share are in decline and I.B.I.- Managing & Underwriting is paying out what we feel is an uncomfortably 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. 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 in mind though, if the poor dividend characteristics of I.B.I.- Managing & Underwriting don't faze you, it's worth being mindful of the risks involved with this business. Case in point: We've spotted 3 warning signs for I.B.I.- Managing & Underwriting you should be aware of.

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.