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PNE Industries Ltd (SGX:BDA) stock is about to trade ex-dividend in 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, PNE Industries investors that purchase the stock on or after the 22nd of May will not receive the dividend, which will be paid on the 13th of June.
The company's next dividend payment will be S$0.01 per share. Last year, in total, the company distributed S$0.03 to shareholders. Last year's total dividend payments show that PNE Industries has a trailing yield of 6.5% on the current share price of S$0.46. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
We've discovered 3 warning signs about PNE Industries. View them for free.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. PNE Industries distributed an unsustainably high 158% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. A useful secondary check can be to evaluate whether PNE Industries generated enough free cash flow to afford its dividend.
It's good to see that while PNE Industries's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.
See our latest analysis for PNE Industries
Click here to see how much of its profit PNE Industries 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. PNE Industries's earnings per share have fallen at approximately 28% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.