Isras Investment Company Ltd (TLV:ISRS) stock is about to trade ex-dividend in 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. This means that investors who purchase Isras Investment's shares on or after the 25th of November will not receive the dividend, which will be paid on the 7th 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 ₪32.00 to shareholders. Based on the last year's worth of payments, Isras Investment stock has a trailing yield of around 4.9% on the current share price of ₪794.5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Isras Investment has been able to grow its dividends, or if the dividend might be cut.
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. Isras Investment is paying out an acceptable 52% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 47% of its free cash flow in the past year.
It's positive to see that Isras Investment'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.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's not encouraging to see that Isras Investment's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Isras Investment has delivered 21% dividend growth per year on average over the past 10 years.
The Bottom Line
Is Isras Investment worth buying for its dividend? Earnings per share have been flat and Isras Investment's dividend payouts are within reasonable limits; without a sharp decline in earnings we feel that the dividend is likely somewhat sustainable. In summary, while it has some positive characteristics, we're not inclined to race out and buy Isras Investment today.
While it's tempting to invest in Isras Investment for the dividends alone, you should always be mindful of the risks involved. We've identified 5 warning signs with Isras Investment (at least 1 which is significant), and understanding them should be part of your investment process.
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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