PSG Financial Services (JSE:KST) Could Be A Buy For Its Upcoming Dividend

It looks like PSG Financial Services Limited (JSE:KST) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. Meaning, you will need to purchase PSG Financial Services' shares before the 8th of May to receive the dividend, which will be paid on the 13th of May.

The company's next dividend payment will be R00.285 per share. Last year, in total, the company distributed R0.42 to shareholders. Based on the last year's worth of payments, PSG Financial Services stock has a trailing yield of around 2.7% on the current share price of R015.40. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether PSG Financial Services has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for PSG Financial Services

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. PSG Financial Services paid out 52% of its earnings to investors last year, a normal payout level for most businesses.

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 PSG Financial Services paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see PSG Financial Services's earnings per share have risen 12% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. PSG Financial Services has delivered an average of 18% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

From a dividend perspective, should investors buy or avoid PSG Financial Services? Earnings per share are growing at an attractive rate, and PSG Financial Services is paying out a bit over half its profits. We think this is a pretty attractive combination, and would be interested in investigating PSG Financial Services more closely.

Want to learn more about PSG Financial Services's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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.

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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.