Planetel S.p.A. (BIT:PLN) Is About To Go Ex-Dividend, And It Pays A 1.9% Yield

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 Planetel S.p.A. (BIT:PLN) is about to go ex-dividend in just 3 days. Typically, the ex-dividend date is one business day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Planetel's shares before the 6th of May in order to receive the dividend, which the company will pay on the 8th of May.

The company's upcoming dividend is €0.10 a share, following on from the last 12 months, when the company distributed a total of €0.10 per share to shareholders. Looking at the last 12 months of distributions, Planetel has a trailing yield of approximately 1.9% on its current stock price of €5.20. If you buy this business for its dividend, you should have an idea of whether Planetel's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Planetel

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Planetel paid out more than half (61%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 52% of its free cash flow as dividends, within the usual range for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that Planetel's earnings are effectively flat over the past three years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Given that Planetel has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Is Planetel worth buying for its dividend? Planetel has been unable to generate earnings growth, but at least its dividend looks sustainable, with its profit and cashflow payout ratios within reasonable limits. It's not that we think Planetel is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that in mind though, if the poor dividend characteristics of Planetel don't faze you, it's worth being mindful of the risks involved with this business. Be aware that Planetel is showing 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

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.