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Doman Building Materials Group Ltd. (TSE:DBM) Looks Interesting, And It’s About To Pay A Dividend

4 min read

Readers hoping to buy Doman Building Materials Group Ltd. (TSE:DBM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. 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. In other words, investors can purchase Doman Building Materials Group’s shares before the 27th of March in order to be eligible for the dividend, which will be paid on the 12th of April.

The company’s next dividend payment will be CA$0.14 per share. Last year, in total, the company distributed CA$0.56 to shareholders. Calculating the last year’s worth of payments shows that Doman Building Materials Group has a trailing yield of 6.5% on the current share price of CA$8.56. If you buy this business for its dividend, you should have an idea of whether Doman Building Materials Group’s dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Doman Building Materials Group

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Doman Building Materials Group paid out 64% of its earnings to investors last year, a normal payout level for most businesses. 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. It distributed 40% of its free cash flow as dividends, a comfortable payout level for most companies.

It’s positive to see that Doman Building Materials Group’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.

historic-dividend
TSX:DBM Historic Dividend March 23rd 2024

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Doman Building Materials Group’s earnings per share have been growing at 18% a year for the past five years. Doman Building Materials Group has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. 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.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Doman Building Materials Group’s dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Is Doman Building Materials Group worth buying for its dividend? Doman Building Materials Group’s growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There’s a lot to like about Doman Building Materials Group, and we would prioritise taking a closer look at it.

On that note, you’ll want to research what risks Doman Building Materials Group is facing. To help with this, we’ve discovered 2 warning signs for Doman Building Materials Group that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

Valuation is complex, but we’re helping make it simple.

Find out whether Doman Building Materials Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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