The behavior of an optical isolator based on the Faraday effect of an
absorbing magneto-optical material is analyzed, taking into account th
e effect of magnetic circular dichroism (MCD). MCD is indissolubly con
nected with Faraday rotation and limits the maximum obtainable isolati
on ratio through elliptization of the polarization of the incident bea
m. A formula is derived to calculate this effect and applied to a prac
tical example.