Yahoo Finance Here's What We Like About DRB-HICOM Berhad's (KLSE:DRBHCOM) Upcoming Dividend
DRB-HICOM Berhad (KLSE:DRBHCOM) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase DRB-HICOM Berhad's shares before the 30th of May to receive the dividend, which will be paid on the 27th of June.
The company's next dividend payment will be RM00.025 per share, and in the last 12 months, the company paid a total of RM0.025 per share. Based on the last year's worth of payments, DRB-HICOM Berhad stock has a trailing yield of around 1.8% on the current share price of RM01.36. If you buy this business for its dividend, you should have an idea of whether DRB-HICOM Berhad's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for DRB-HICOM Berhad
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. DRB-HICOM Berhad is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether DRB-HICOM Berhad generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 7.1% of its cash flow last year.
It's positive to see that DRB-HICOM Berhad's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. It's not encouraging to see that DRB-HICOM Berhad's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.
DRB-HICOM Berhad also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. DRB-HICOM Berhad's dividend payments per share have declined at 8.4% per year on average over the past 10 years, which is uninspiring.
The Bottom Line
Is DRB-HICOM Berhad an attractive dividend stock, or better left on the shelf? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and DRB-HICOM Berhad is halfway there. There's a lot to like about DRB-HICOM Berhad, and we would prioritise taking a closer look at it.
On that note, you'll want to research what risks DRB-HICOM Berhad is facing. For example - DRB-HICOM Berhad has 1 warning sign we think you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
