- Consumer Finance
Dividend Investors: Don't Be Too Quick To Buy Isracard Ltd. (TLV:ISCD) For Its Upcoming Dividend
It looks like Isracard Ltd. (TLV:ISCD) is about to go ex-dividend in the next 2 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Isracard investors that purchase the stock on or after the 20th of March will not receive the dividend, which will be paid on the 27th of March.
The company's next dividend payment will be ₪0.13 per share. Last year, in total, the company distributed ₪0.74 to shareholders. Last year's total dividend payments show that Isracard has a trailing yield of 5.5% on the current share price of ₪13.52. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Isracard has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Isracard
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 89% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see how much of its profit Isracard paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Isracard's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 68% a year over the past five years.
Unfortunately Isracard has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.
To Sum It Up
Should investors buy Isracard for the upcoming dividend? We're not overly enthused to see Isracard's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. 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.
So if you're still interested in Isracard despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. To that end, you should learn about the 3 warning signs we've spotted with Isracard (including 1 which is a bit unpleasant).
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
Isracard Ltd. operates as a credit card company in Israel.
Excellent balance sheet not a dividend payer.