money Here's Why We're Wary Of Buying TOC Property Backed Lending Trust Plc's (LON:PBLT) For Its Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that TOC Property Backed Lending Trust Plc (LON:PBLT) is about to go ex-dividend in just 3 days. You can purchase shares before the 5th of March in order to receive the dividend, which the company will pay on the 10th of April.
TOC Property Backed Lending Trust's next dividend payment will be UK£0.015 per share, on the back of last year when the company paid a total of UK£0.06 to shareholders. Calculating the last year's worth of payments shows that TOC Property Backed Lending Trust has a trailing yield of 5.8% on the current share price of £1.035. 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 TOC Property Backed Lending Trust has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for TOC Property Backed Lending Trust
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year, TOC Property Backed Lending Trust paid out 227% of its profit to shareholders in the form of dividends. This is not sustainable behaviour and requires a closer look on behalf of the purchaser.
When a company pays out a dividend that is not well covered by profits, the dividend is generally seen as more vulnerable to being cut.
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. As a result, it's definitely disappointing to see that earnings per share have declined 7.2% over the past year.
We'd also point out that TOC Property Backed Lending Trust issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. TOC Property Backed Lending Trust's dividend payments are effectively flat on where they were three years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
To Sum It Up
Is TOC Property Backed Lending Trust worth buying for its dividend? Earnings per share are in decline and TOC Property Backed Lending Trust is paying out what we feel is an uncomfortably high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Want to learn more about TOC Property Backed Lending Trust's dividend performance? Check out this visualisation of its historical revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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