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Dividend Investors: Don't Be Too Quick To Buy TOC Property Backed Lending Trust Plc (LON:PBLT) For Its Upcoming Dividend

Simply Wall St

TOC Property Backed Lending Trust Plc (LON:PBLT) stock is about to trade ex-dividend in 3 days time. Investors can purchase shares before the 12th of September in order to be eligible for this dividend, which will be paid on the 4th of October.

TOC Property Backed Lending Trust's next dividend payment will be UK£0.015 per share, and in the last 12 months, the company paid a total of UK£0.06 per share. 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. TOC Property Backed Lending Trust paid out a disturbingly high 227% of its profit as dividends last year, which makes us concerned there's something we don't fully understand in the business.

Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.

Click here to see how much of its profit TOC Property Backed Lending Trust paid out over the last 12 months.

LSE:PBLT Historical Dividend Yield, September 8th 2019

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. From this viewpoint, it's unfortunate that earnings per share have declined 7.2% over the last 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. It looks like the TOC Property Backed Lending Trust dividends are largely the same as they were two 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.

Final Takeaway

From a dividend perspective, should investors buy or avoid TOC Property Backed Lending Trust? Not only are earnings per share shrinking, but TOC Property Backed Lending Trust is paying out a disconcertingly 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. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.

Want to learn more about TOC Property Backed Lending Trust's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.