Here's What We Like About JTC's (LON:JTC) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see JTC PLC (LON:JTC) 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. This means that investors who purchase JTC's shares on or after the 21st of September will not receive the dividend, which will be paid on the 20th of October.

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£0.10 to shareholders. Last year's total dividend payments show that JTC has a trailing yield of 1.3% on the current share price of £7.5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether JTC can afford its dividend, and if the dividend could grow.

Check out our latest analysis for JTC

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. JTC paid out more than half (60%) of its earnings last year, which is a regular payout ratio for most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see JTC's earnings have been skyrocketing, up 32% per annum for the past five years.

JTC also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. JTC has delivered 38% dividend growth per year on average over the past five years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Has JTC got what it takes to maintain its dividend payments? Earnings per share are growing nicely, and JTC is paying out a percentage of its earnings that is around the average for dividend-paying stocks. In summary, JTC appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

On that note, you'll want to research what risks JTC is facing. Case in point: We've spotted 1 warning sign for JTC you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.