July 15, 2024

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Doman Building Materials Group (TSE:DBM) Has Affirmed Its Dividend Of CA$0.14

3 min read

Doman Building Materials Group Ltd.’s (TSE:DBM) investors are due to receive a payment of CA$0.14 per share on 12th of July. This means the annual payment is 7.9% of the current stock price, which is above the average for the industry.

View our latest analysis for Doman Building Materials Group

Doman Building Materials Group’s Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn’t matter if the payment isn’t sustainable. The last payment was quite easily covered by earnings, but it made up 304% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share is forecast to fall by 0.3% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 65%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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historic-dividend

Dividend Volatility

The company’s dividend history has been marked by instability, with at least one cut in the last 10 years. The last annual payment of CA$0.56 was flat on the annual payment from10 years ago. We’re glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it’s even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Doman Building Materials Group has grown earnings per share at 24% per year over the past five years. The company’s earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Doman Building Materials Group could prove to be a strong dividend payer.

In Summary

Overall, it’s nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don’t think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we’ve identified 2 warning signs for Doman Building Materials Group (1 is a bit concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

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