Is buying TClarke plc (LSE:CTO) for its upcoming £0.01 dividend a good choice?

Author: Raj Burman / Source: Simply Wall St

If you are interested in cashing in on TClarke’s (LSE:CTO) upcoming dividend of £0.01 per share, you only have 3 days left to buy the shares before its ex-dividend date, Thu 07 Sep 2017, in time for dividends payable on the Fri 06 Oct 2017. Is this future income a persuasive enough catalyst for investors to think about CTO as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.

What is the ex-dividend date?
If you purchase a stock on or after its ex-dividend date, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.

Don’t buy TClarke (CTO) for the 3.97% dividend, here is why

Investors should be cautious before buying TClarke plc (LSE:CTO) just for its attractive 3.97% dividend yield. When I see a juicy dividend, my eyes don’t light up just yet. I always check a couple of key metrics that I think a lot of investors fail to look into. Let’s look at this for CTO.

The first thing I look at is the company’s payout ratio.

Payout ratio is a measure of how much of a company’s earnings are paid out as dividends to its shareholders. So a payout ratio of 50% means that shareholders receive 50c for every $1 the company earns. Likewise a payout ratio of 150% means a company cannot afford to pay their dividend using just its earnings and will need to dive into…

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