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 Ilex Medical Ltd (TLV:ILX) is about to go ex-dividend in just three days. If you purchase the stock on or after the 24th of March, you won't be eligible to receive this dividend, when it is paid on the 20th of April.
Ilex Medical's next dividend payment will be ₪5.32 per share. Last year, in total, the company distributed ₪5.32 to shareholders. Last year's total dividend payments show that Ilex Medical has a trailing yield of 4.6% on the current share price of ₪115.9. If you buy this business for its dividend, you should have an idea of whether Ilex Medical's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Ilex Medical paid out a comfortable 47% of its profit last year.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Ilex Medical's earnings have been skyrocketing, up 30% per annum for the past five years. Ilex Medical is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Ilex Medical has delivered 11% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Should investors buy Ilex Medical for the upcoming dividend? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Ilex Medical appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while Ilex Medical has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for Ilex Medical you should know about.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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