Three Days Left To Buy Prestal Holdings Limited (ASX:PTL) Before The Ex-Dividend Date

Prestal Holdings Limited (ASX:PTL) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Thus, you can purchase Prestal Holdings' shares before the 16th of May in order to receive the dividend, which the company will pay on the 24th of May.

The company's next dividend payment will be AU$0.18 per share. Last year, in total, the company distributed AU$0.023 to shareholders. Based on the last year's worth of payments, Prestal Holdings stock has a trailing yield of around 7.0% on the current share price of AU$0.33. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Prestal Holdings can afford its dividend, and if the dividend could grow.

See our latest analysis for Prestal Holdings

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. Prestal Holdings lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If Prestal Holdings didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.

Click here to see how much of its profit Prestal Holdings 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Prestal Holdings was unprofitable last year, but at least the general trend suggests its earnings have been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Prestal Holdings has delivered an average of 2.5% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

We update our analysis on Prestal Holdings every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Should investors buy Prestal Holdings for the upcoming dividend? It's hard to get used to Prestal Holdings paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. To summarise, Prestal Holdings looks okay on this analysis, although it doesn't appear a stand-out opportunity.

On that note, you'll want to research what risks Prestal Holdings is facing. To help with this, we've discovered 2 warning signs for Prestal Holdings that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.