PCTEL (NASDAQ:PCTI) Is Due To Pay A Dividend Of US$0.055

The board of PCTEL, Inc. (NASDAQ:PCTI) has announced that it will pay a dividend on the 15th of February, with investors receiving US$0.055 per share. This means the annual payment is 4.2% of the current stock price, which is above the average for the industry.

View our latest analysis for PCTEL

PCTEL Doesn't Earn Enough To Cover Its Payments

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 234% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 61%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next 12 months is set to see EPS grow by 53.9%. If the dividend continues on its recent course, the payout ratio in 12 months could be 155%, which is a bit high and could start applying pressure to the balance sheet.

PCTEL Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from US$0.12 in 2012 to the most recent annual payment of US$0.22. This means that it has been growing its distributions at 6.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth Could Be Constrained

The company's investors will be pleased to have been receiving dividend income for some time. PCTEL has seen EPS rising for the last five years, at 43% per annum. EPS has been growing well, but PCTEL has been paying out a massive proportion of its earnings, which can make the dividend tough to maintain.

Our Thoughts On PCTEL's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 3 warning signs for PCTEL that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.