Duopharma Biotech Berhad's (KLSE:DPHARMA) Shareholders Will Receive A Smaller Dividend Than Last Year

Duopharma Biotech Berhad (KLSE:DPHARMA) is reducing its dividend to RM0.018 on the 13th of May. This means that the dividend yield is 1.5%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Duopharma Biotech Berhad

Duopharma Biotech Berhad's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Duopharma Biotech Berhad was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 17.9%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was RM0.05 in 2012, and the most recent fiscal year payment was RM0.023. This works out to be a decline of approximately 7.4% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Duopharma Biotech Berhad has seen EPS rising for the last five years, at 18% per annum. Duopharma Biotech Berhad definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Duopharma Biotech Berhad that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of 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.