We Wouldn't Be Too Quick To Buy PHC Holdings Corporation (TSE:6523) Before It Goes Ex-Dividend

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 PHC Holdings Corporation (TSE:6523) is about to go ex-dividend in just three 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase PHC Holdings' shares on or after the 27th of September will not receive the dividend, which will be paid on the 4th of December.

The company's next dividend payment will be JP¥21.00 per share. Last year, in total, the company distributed JP¥42.00 to shareholders. Based on the last year's worth of payments, PHC Holdings stock has a trailing yield of around 3.9% on the current share price of JP¥1077.00. 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.

View our latest analysis for PHC Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. PHC Holdings reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If PHC Holdings didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Fortunately, it paid out only 29% of its free cash flow in the past year.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. PHC Holdings reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. PHC Holdings has seen its dividend decline 16% per annum on average over the past three years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

We update our analysis on PHC Holdings every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

From a dividend perspective, should investors buy or avoid PHC Holdings? It's hard to get used to PHC Holdings paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: PHC Holdings has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

So if you're still interested in PHC Holdings despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 1 warning sign for PHC Holdings you should know about.

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.