Should You Buy Payment Financial Technologies Ltd (TLV:PMNT) For Its Upcoming Dividend?

Payment Financial Technologies Ltd (TLV:PMNT) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Payment Financial Technologies' shares before the 17th of August to receive the dividend, which will be paid on the 24th of August.

The upcoming dividend for Payment Financial Technologies is ₪0.081 per share. 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 Payment Financial Technologies can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Payment Financial Technologies

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. Payment Financial Technologies paid out a comfortable 26% of its profit last year. Payment Financial Technologies paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see how much of its profit Payment Financial Technologies paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Payment Financial Technologies's earnings have been skyrocketing, up 80% per annum for the past five years.

We'd also point out that Payment Financial Technologies issued a meaningful number of new shares in the past year. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

This is Payment Financial Technologies's first year of paying a dividend, so it doesn't have much of a history yet to compare to.

To Sum It Up

From a dividend perspective, should investors buy or avoid Payment Financial Technologies? Companies like Payment Financial Technologies that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Payment Financial Technologies appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

So while Payment Financial Technologies looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 4 warning signs for Payment Financial Technologies (1 is potentially serious!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.