Read This Before Considering Ilex Medical Ltd (TLV:ILX) For Its Upcoming ₪1.2195 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 Ilex Medical Ltd (TLV:ILX) is about to go ex-dividend in just 2 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Ilex Medical's shares on or after the 7th of April will not receive the dividend, which will be paid on the 15th of April.

The company's next dividend payment will be ₪1.2195 per share. Last year, in total, the company distributed ₪1.36 to shareholders. Based on the last year's worth of payments, Ilex Medical stock has a trailing yield of around 2.2% on the current share price of ₪61.31. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Ilex Medical has been able to grow its dividends, or if the dividend might be cut.

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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. Fortunately Ilex Medical's payout ratio is modest, at just 28% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 32% of its free cash flow in the past year.

It's positive to see that Ilex Medical's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for Ilex Medical

Click here to see how much of its profit Ilex Medical paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Ilex Medical's earnings per share have fallen at approximately 7.6% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Ilex Medical has seen its dividend decline 9.4% per annum on average over the past 10 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.

Final Takeaway

Is Ilex Medical an attractive dividend stock, or better left on the shelf? Ilex Medical has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, while it has some positive characteristics, we're not inclined to race out and buy Ilex Medical today.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. We've identified 2 warning signs with Ilex Medical (at least 1 which can't be ignored) , 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.