Do These 3 Checks Before Buying Portmeirion Group PLC (LON:PMP) For Its Upcoming Dividend
It looks like Portmeirion Group PLC (LON:PMP) is about to go ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Portmeirion Group investors that purchase the stock on or after the 16th of November will not receive the dividend, which will be paid on the 15th of December.
The company's next dividend payment will be UK£0.035 per share, on the back of last year when the company paid a total of UK£0.15 to shareholders. Calculating the last year's worth of payments shows that Portmeirion Group has a trailing yield of 6.6% on the current share price of £2.36. If you buy this business for its dividend, you should have an idea of whether Portmeirion Group's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Portmeirion Group
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Portmeirion Group's payout ratio is modest, at just 46% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Portmeirion Group paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Portmeirion Group's earnings per share have fallen at approximately 12% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Portmeirion Group has seen its dividend decline 3.4% per annum on average over the past 10 years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
The Bottom Line
Is Portmeirion Group an attractive dividend stock, or better left on the shelf? Portmeirion Group's earnings per share have fallen noticeably and, although it paid out less than half its profit as dividends last year, it paid out a disconcertingly high percentage of its cashflow, which is not a great combination. It's not that we think Portmeirion Group is a bad company, but these characteristics don't generally lead to outstanding dividend performance.
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 Portmeirion Group. Be aware that Portmeirion Group is showing 3 warning signs in our investment analysis, and 1 of those is potentially serious...
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.
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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.
