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Readers hoping to buy TOC Property Backed Lending Trust Plc (LON:PBLT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase TOC Property Backed Lending Trust's shares on or after the 10th of June will not receive the dividend, which will be paid on the 30th of June.
The company's upcoming dividend is UK£0.01 a share, following on from the last 12 months, when the company distributed a total of UK£0.06 per share to shareholders. Based on the last year's worth of payments, TOC Property Backed Lending Trust stock has a trailing yield of around 4.7% on the current share price of £0.86. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. 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.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Last year, TOC Property Backed Lending Trust paid out 94% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business.
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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see TOC Property Backed Lending Trust's earnings per share have dropped 5.2% a year over the past three 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. TOC Property Backed Lending Trust's dividend payments per share have declined at 9.6% per year on average over the past four years, which is uninspiring. 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.
From a dividend perspective, should investors buy or avoid TOC Property Backed Lending Trust? 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. TOC Property Backed Lending Trust doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
With that in mind though, if the poor dividend characteristics of TOC Property Backed Lending Trust don't faze you, it's worth being mindful of the risks involved with this business. To help with this, we've discovered 5 warning signs for TOC Property Backed Lending Trust (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.
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.
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. 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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