We Wouldn't Be Too Quick To Buy Isras Investment Company Ltd (TLV:ISRS) Before It Goes Ex-Dividend

It looks like Isras Investment Company Ltd (TLV:ISRS) is about to go ex-dividend in the next four 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. Therefore, if you purchase Isras Investment's shares on or after the 27th of November, you won't be eligible to receive the dividend, when it is paid on the 8th of December.

The company's next dividend payment will be ₪15.00 per share, on the back of last year when the company paid a total of ₪45.00 to shareholders. Last year's total dividend payments show that Isras Investment has a trailing yield of 5.2% on the current share price of ₪860.00. 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 Isras Investment has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Isras Investment paid out 56% of its earnings to investors last year, a normal payout level for most businesses. 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. It paid out more than half (58%) of its free cash flow in the past year, which is within an average range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Check out our latest analysis for Isras Investment

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's not ideal to see Isras Investment's earnings per share have been shrinking at 3.7% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Isras Investment has delivered an average of 19% per year annual increase in its dividend, based on the past 10 years of dividend payments. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

To Sum It Up

Should investors buy Isras Investment for the upcoming dividend? It's never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We're aware though that if earnings continue to decline, the dividend could be at risk. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Isras Investment. Our analysis shows 4 warning signs for Isras Investment that we strongly recommend you have a look at before investing in the company.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.