Duopharma Biotech Berhad (KLSE:DPHARMA) Looks Interesting, And It's About To Pay A Dividend
Readers hoping to buy Duopharma Biotech Berhad (KLSE:DPHARMA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Duopharma Biotech Berhad investors that purchase the stock on or after the 3rd of September will not receive the dividend, which will be paid on the 21st of September.
The company's upcoming dividend is RM00.015 a share, following on from the last 12 months, when the company distributed a total of RM0.045 per share to shareholders. Last year's total dividend payments show that Duopharma Biotech Berhad has a trailing yield of 3.6% on the current share price of RM01.28. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Duopharma Biotech Berhad can afford its dividend, and if the dividend could grow.
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. Fortunately Duopharma Biotech Berhad's payout ratio is modest, at just 43% of profit. 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. Dividends consumed 75% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Duopharma Biotech 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.
Check out our latest analysis for Duopharma Biotech Berhad
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Duopharma Biotech Berhad's earnings per share have risen 11% per annum over the last five years. Duopharma Biotech Berhad is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Duopharma Biotech Berhad has lifted its dividend by approximately 4.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Duopharma Biotech Berhad is keeping back more of its profits to grow the business.
To Sum It Up
From a dividend perspective, should investors buy or avoid Duopharma Biotech Berhad? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for Duopharma Biotech Berhad that you should be aware of before investing in their 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.