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Ebix, Inc. (NASDAQ:EBIX) Is About To Go Ex-Dividend, And It Pays A 1.6% Yield

It looks like Ebix, Inc. (NASDAQ:EBIX) is about to go ex-dividend in the next 4 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Ebix investors that purchase the stock on or after the 2nd of December will not receive the dividend, which will be paid on the 16th of December.

The company's next dividend payment will be US$0.075 per share, on the back of last year when the company paid a total of US$0.30 to shareholders. Based on the last year's worth of payments, Ebix has a trailing yield of 1.6% on the current stock price of $19.32. 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.

See our latest analysis for Ebix

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. Ebix has a low and conservative payout ratio of just 13% of its income after tax. 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 17% of its free cash flow as dividends last year, which is conservatively low.

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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.

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

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historic-dividend

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Ebix's earnings per share have been shrinking at 4.1% a year over the previous five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Ebix has delivered an average of 6.5% per year annual increase in its dividend, based on the past 10 years of dividend payments.

Final Takeaway

Has Ebix got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Ebix looks okay on this analysis, although it doesn't appear a stand-out opportunity.

While it's tempting to invest in Ebix for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for Ebix that we strongly recommend you have a look at before investing in the company.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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