July 15, 2024

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Doman Building Materials Group Ltd. (TSE:DBM) Stock Goes Ex-Dividend In Just Four Days

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It looks like Doman Building Materials Group Ltd. (TSE:DBM) is about to go ex-dividend in the next 4 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 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. Thus, you can purchase Doman Building Materials Group’s shares before the 28th of June in order to receive the dividend, which the company will pay on the 12th of July.

The company’s upcoming dividend is CA$0.14 a share, following on from the last 12 months, when the company distributed a total of CA$0.56 per share to shareholders. Looking at the last 12 months of distributions, Doman Building Materials Group has a trailing yield of approximately 8.1% on its current stock price of CA$6.92. 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. We need to see whether the dividend is covered by earnings and if it’s growing.

View our latest analysis for Doman Building Materials Group

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. Doman Building Materials Group is paying out an acceptable 65% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Doman Building Materials Group generated enough free cash flow to afford its dividend. Over the last year, it paid out dividends equivalent to 304% of what it generated in free cash flow, a disturbingly high percentage. Our definition of free cash flow excludes cash generated from asset sales, so since Doman Building Materials Group is paying out such a high percentage of its cash flow, it might be worth seeing if it sold assets or had similar events that might have led to such a high dividend payment.

While Doman Building Materials Group’s dividends were covered by the company’s reported profits, cash is somewhat more important, so it’s not great to see that the company didn’t generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Doman Building Materials Group’s ability to maintain its dividend.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

historic-dividend
TSX:DBM Historic Dividend June 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. For this reason, we’re glad to see Doman Building Materials Group’s earnings per share have risen 17% per annum over the last five years. Earnings have been growing at a decent rate, but we’re concerned dividend payments consumed most of the company’s cash flow over the past year.

Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. It looks like the Doman Building Materials Group dividends are largely the same as they were 10 years ago.

Final Takeaway

Has Doman Building Materials Group got what it takes to maintain its dividend payments? Earnings per share growth is a positive, and the company’s payout ratio looks normal. However, we note Doman Building Materials Group paid out a much higher percentage of its free cash flow, which makes us uncomfortable. All things considered, we are not particularly enthused about Doman Building Materials Group from a dividend perspective.

With that being said, if dividends aren’t your biggest concern with Doman Building Materials Group, you should know about the other risks facing this business. Be aware that Doman Building Materials Group is showing 2 warning signs in our investment analysis, and 1 of those is potentially serious…

If you’re in the market for strong dividend payers, we recommend checking our selection of top 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.

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 [email protected]

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