Interested In PCTEL's (NASDAQ:PCTI) Upcoming US$0.055 Dividend? You Have Four Days Left
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see PCTEL, Inc. (NASDAQ:PCTI) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase PCTEL's shares on or after the 7th of August will not receive the dividend, which will be paid on the 15th of August.
The company's next dividend payment will be US$0.055 per share, and in the last 12 months, the company paid a total of US$0.22 per share. Looking at the last 12 months of distributions, PCTEL has a trailing yield of approximately 4.5% on its current stock price of $4.86. If you buy this business for its dividend, you should have an idea of whether PCTEL's dividend is reliable and sustainable. So we need to investigate whether PCTEL can afford its dividend, and if the dividend could grow.
View our latest analysis for PCTEL
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. PCTEL paid out 70% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether PCTEL generated enough free cash flow to afford its dividend. Over the last year it paid out 58% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that PCTEL's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit PCTEL paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see PCTEL earnings per share are up 4.9% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. PCTEL has delivered an average of 6.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Should investors buy PCTEL for the upcoming dividend? Earnings per share have been growing modestly and PCTEL paid out a bit over half of its earnings and free cash flow last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
If you want to look further into PCTEL, it's worth knowing the risks this business faces. To help with this, we've discovered 3 warning signs for PCTEL (1 can't be ignored!) that you ought to be aware of before buying the shares.
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.
