Why It Might Not Make Sense To Buy JTC PLC (LON:JTC) For Its Upcoming Dividend

It looks like JTC PLC (LON:JTC) is about to go ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, JTC investors that purchase the stock on or after the 29th of May will not receive the dividend, which will be paid on the 27th of June.

The company's next dividend payment will be UK£0.0824 per share, on the back of last year when the company paid a total of UK£0.13 to shareholders. Looking at the last 12 months of distributions, JTC has a trailing yield of approximately 1.5% on its current stock price of UK£8.39. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. JTC 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.

View our latest analysis for JTC

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

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. JTC was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. JTC has delivered an average of 30% per year annual increase in its dividend, based on the past seven years of dividend payments.

Remember, you can always get a snapshot of JTC's financial health, by checking our visualisation of its financial health, here.

The Bottom Line

Should investors buy JTC for the upcoming dividend? It's hard to get past the idea of JTC paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. JTC 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.

Ever wonder what the future holds for JTC? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.