It looks like Dancomech Holdings Berhad( KLSE:DANCO ) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Dancomech Holdings Berhad's shares before the 8th of September to receive the dividend, which will be paid on the 26th of September.
The company's next dividend payment will be RM0.0075 per share. Last year, in total, the company distributed RM0.02 to shareholders. Based on the last year's worth of payments, Dancomech Holdings Berhad has a trailing yield of 4.6% on the current stock price of MYR0.435. 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 Dancomech Holdings Berhad has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Dancomech Holdings Berhad
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Dancomech Holdings Berhad's payout ratio is modest, at just 43% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 61% of its free cash flow as dividends, within the usual range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. This is why it's a relief to see Dancomech Holdings Berhad earnings per share are up 5.2% per annum over the last five years. Decent historical earnings per share growth suggests Dancomech Holdings Berhad has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past seven years, Dancomech Holdings Berhad has increased its dividend at approximately 4.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Is Dancomech Holdings Berhad an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest, and it's interesting that Dancomech Holdings Berhad is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. In summary, it's hard to get excited about Dancomech Holdings Berhad from a dividend perspective.
While it's tempting to invest in Dancomech Holdings Berhad for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Dancomech Holdings Berhad and you should be aware of these before buying any shares.
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.
