DFI Retail Group Holdings Limited (SGX:D01) Stock Goes Ex-Dividend In Just Two Days

It looks like DFI Retail Group Holdings Limited (SGX:D01) is about to go ex-dividend in the next 2 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. Meaning, you will need to purchase DFI Retail Group Holdings' shares before the 22nd of August to receive the dividend, which will be paid on the 16th of October.

The company's next dividend payment will be US$0.035 per share, on the back of last year when the company paid a total of US$0.085 to shareholders. Calculating the last year's worth of payments shows that DFI Retail Group Holdings has a trailing yield of 4.5% on the current share price of US$1.90. If you buy this business for its dividend, you should have an idea of whether DFI Retail Group Holdings'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 DFI Retail Group Holdings

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. Last year, DFI Retail Group Holdings paid out 96% of its income as dividends, which is above a level that we're comfortable with, especially if the company needs to reinvest in its business. 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. It paid out 13% of its free cash flow as dividends last year, which is conservatively low.

It's good to see that while DFI Retail Group Holdings's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if this were to happen repeatedly, we'd be concerned about whether the dividend is sustainable in a downturn.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see DFI Retail Group Holdings earnings per share are up 7.0% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. DFI Retail Group Holdings has seen its dividend decline 9.5% per annum on average over the past 10 years, which is not great to see. DFI Retail Group Holdings is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Should investors buy DFI Retail Group Holdings for the upcoming dividend? Earnings per share have grown modestly, and last year DFI Retail Group Holdings paid out a low percentage of its cash flow. However, its dividend payments were not well covered by profits. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

However if you're still interested in DFI Retail Group Holdings as a potential investment, you should definitely consider some of the risks involved with DFI Retail Group Holdings. For example, DFI Retail Group Holdings has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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

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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.