It looks like Paramount Corporation Berhad( KLSE:PARAMON ) is about to go ex-dividend in the next three days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Meaning, you will need to purchase Paramount Corporation Berhad's shares before the 8th of September to receive the dividend, which will be paid on the 21st of September.
The company's upcoming dividend is RM0.03 a share, following on from the last 12 months, when the company distributed a total of RM0.07 per share to shareholders. Looking at the last 12 months of distributions, Paramount Corporation Berhad has a trailing yield of approximately 7.3% on its current stock price of MYR0.96. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Paramount Corporation Berhad can afford its dividend, and if the dividend could grow.
See our latest analysis for Paramount Corporation 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. That's why it's good to see Paramount Corporation Berhad paying out a modest 50% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year it paid out 69% 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?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Paramount Corporation Berhad's earnings per share have dropped 10% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Paramount Corporation Berhad has lifted its dividend by approximately 2.1% a year on average.
The Bottom Line
Has Paramount Corporation Berhad got what it takes to maintain its dividend payments? Earnings per share have fallen significantly, although at least Paramount Corporation Berhad paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Paramount Corporation Berhad's dividend merits.
However if you're still interested in Paramount Corporation Berhad as a potential investment, you should definitely consider some of the risks involved with Paramount Corporation Berhad. Every company has risks, and we've spotted 2 warning signs for Paramount Corporation Berhad (of which 1 makes us a bit uncomfortable!) you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.
