News Highlights: Consider This Before Buying Professional Computer Technology Limited (GTSM:6270) For The 6.9%.
Dividend-paying stocks such as Professional Computer Technology Limited (GTSM: 6270) is generally popular with investors, for good reason – some research suggests that a significant portion of all stock market returns come from reinvested dividends. But sometimes investors buy a popular dividend stock for the yield, and then lose money if the company’s dividend doesn’t meet expectations.
In this case Professional Computer Technology looks likely to be attractive to investors, given its 6.9% dividend yield and more than ten years of payment history. We suspect that many investors bought it for the income. A simple analysis can provide many insights into buying a company for its dividend, and we’ll cover this below.
Click on the interactive chart for our full dividend analysis
GTSM: 6270 Historical dividend February 3, 2021 Payout ratios
Dividends are usually paid from corporate profits. If a company pays out more in dividends than it earns, the dividend can become unsustainable – hardly an ideal situation. So we need to visualize whether a company’s dividend is sustainable in relation to its net profit after tax. Professional computer Technology distributed 104% of its profits as dividend over the following twelve month period. Unless there are extenuating circumstances, a payout ratio of more than 100% from the perspective of an investor hoping to own the company for years to come is certainly a concern.
We also measure dividends paid against a company’s free cash flow to see if enough cash has been generated to cover the dividend. Professional computer Technology paid out 131% of its free cash flow last year, which we think is worrying if cash flows don’t improve. Paying out such a high percentage of the cash flow suggests that the dividend was funded from cash at the bank or by borrowing, neither of which is desirable in the long run. As a Professional Computer Technology The dividend was not well backed by earnings or cash flow, we would be concerned that this dividend could be endangered in the long term.
With a strong net cash balance, Professional Computer Technology From a dividend point of view, investors don’t have to worry much in the short term.
Consider getting our latest analysis on Professional Computer Technology’s financial position here.
Before buying a stock for the earnings, we want to see if dividends have been stable in the past and if the company has a track record of maintaining its dividend. Professional computer Technology has been paying dividends for a long time, but for this analysis we are only looking at payments over the past 10 years. This dividend was unstable, which we define as lowered one or more times over this time. Over the past 10 year period, the first annual payment was NT $ 2.0 in 2011, compared to NT $ 1.3 last year. This equates to a decrease of about 4.2% per year over that time. Professional Computer Technology The dividend has been cut sharply at least once, so it hasn’t dropped 4.2% every year, but this is quite an approximation of the long-term change.
When a company’s dividend per share falls, we wonder if this is a poor reflection of the company’s external operating conditions or its capital allocation decisions. Regardless, we find it hard to get excited about a company with a declining dividend.
Dividend growth potential
With a relatively unstable dividend, it is even more important to see if earnings per share (EPS) is growing. Why risk a dividend cut unless there is a good chance of bigger dividends in the future? It’s good to see Professional Computer Technology has grown its earnings per share by 30% per year for the past five years. The company has grown its EPS at a very rapid pace while distributing almost all of its earnings as dividends. While earnings per share could grow fast enough to make the dividend sustainable, in these situations we would like to pay extra attention to any vulnerabilities in the company’s balance sheet.
In summary, shareholders should always check that professional computer Technology’s dividends are payable, its dividend payments are relatively stable, and it has good prospects for growing its income and dividends. Professional computer Technology paid out almost all of his cash flow and profits as dividends, leaving little to reinvest in the business. Subsequently, earnings growth was good, but unfortunately the dividend has been cut at least once in the past. In summary, professional computer Technology has a number of shortcomings that we would be difficult to overcome. Things can change, but we think there are some better ideas.
Investors generally prefer companies that have consistent, stable dividend policies as opposed to companies that have erratic policies. However, there are other things that investors should consider when analyzing stock performance. For example, we have chosen 2 warning signals for Professional Computer Technology which investors should be aware of before investing capital in this stock.
We’ve also compiled a list of global stocks with a market cap of more than $ 1 billion and a return of more than 3%.
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This article from Simply Wall St is general in nature. It is not a recommendation to buy or sell stock, and does not take into account your goals or your financial situation. We strive to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality material. Simply Wall St has no exposure to said stocks. * Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
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