Don't Race Out To Buy Novolog (Pharm-Up 1966) Ltd (TLV:NVLG) Just Because It's Going Ex-Dividend

Novolog (Pharm-Up 1966) Ltd (TLV:NVLG) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Accordingly, Novolog (Pharm-Up 1966) investors that purchase the stock on or after the 2nd of December will not receive the dividend, which will be paid on the 9th of December.

The company's next dividend payment will be ₪0.019579 per share. Last year, in total, the company distributed ₪0.059 to shareholders. Calculating the last year's worth of payments shows that Novolog (Pharm-Up 1966) has a trailing yield of 3.4% on the current share price of ₪1.741. 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.

View our latest analysis for Novolog (Pharm-Up 1966)

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. Novolog (Pharm-Up 1966) reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Novolog (Pharm-Up 1966) didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Dividends consumed 68% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

Click here to see how much of its profit Novolog (Pharm-Up 1966) 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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Novolog (Pharm-Up 1966) was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past seven years, Novolog (Pharm-Up 1966) has increased its dividend at approximately 16% a year on average.

Get our latest analysis on Novolog (Pharm-Up 1966)'s balance sheet health here.

The Bottom Line

Should investors buy Novolog (Pharm-Up 1966) for the upcoming dividend? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. Bottom line: Novolog (Pharm-Up 1966) has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that being said, if you're still considering Novolog (Pharm-Up 1966) as an investment, you'll find it beneficial to know what risks this stock is facing. We've identified 2 warning signs with Novolog (Pharm-Up 1966) (at least 1 which can't be ignored), and understanding them should be part of your investment process.

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.