Don't Buy P.C.B. Technologies Ltd (TLV:PCBT) For Its Next Dividend Without Doing These Checks

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that P.C.B. Technologies Ltd (TLV:PCBT) is about to go ex-dividend in just 2 days. This means that investors who purchase shares on or after the 3rd of December will not receive the dividend, which will be paid on the 15th of December.

The upcoming dividend for P.C.B. Technologies is ₪0.37 per share, increased from last year's total dividends per share of ₪0.14. If you buy this business for its dividend, you should have an idea of whether P.C.B. Technologies's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for P.C.B. Technologies

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. P.C.B. Technologies is paying out just 2.9% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution.

Click here to see how much of its profit P.C.B. Technologies paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Readers will understand then, why we're concerned to see P.C.B. Technologies's earnings per share have dropped 19% a year over the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. P.C.B. Technologies's dividend payments per share have declined at 1.2% per year on average over the past 10 years, which is uninspiring.

The Bottom Line

From a dividend perspective, should investors buy or avoid P.C.B. Technologies? It's disappointing to see earnings per share declining, and this would ordinarily be enough to discourage us from most dividend stocks, even though P.C.B. Technologies is paying out less than half its income as dividends. However, it's also paying out an uncomfortably high percentage of its cash flow, which makes us wonder just how sustainable the dividend really is. It's not that we think P.C.B. Technologies is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with P.C.B. Technologies. Every company has risks, and we've spotted 1 warning sign for P.C.B. Technologies you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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