Paramount Corporation Berhad (KLSE:PARAMON) Could Be A Buy For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Paramount Corporation Berhad (KLSE:PARAMON) is about to trade ex-dividend in the next three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Paramount Corporation Berhad investors that purchase the stock on or after the 10th of September will not receive the dividend, which will be paid on the 24th of September.
The company's next dividend payment will be RM00.03 per share. Last year, in total, the company distributed RM0.075 to shareholders. Calculating the last year's worth of payments shows that Paramount Corporation Berhad has a trailing yield of 7.3% on the current share price of RM01.03. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Paramount Corporation Berhad paid out a comfortable 37% of its profit last year. 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. Over the last year it paid out 71% of its free cash flow as dividends, within the usual range for most companies.
It's positive to see that Paramount Corporation Berhad'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.
Check out our latest analysis for Paramount Corporation Berhad
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. It's encouraging to see Paramount Corporation Berhad has grown its earnings rapidly, up 52% a year for the past five years.
Paramount Corporation Berhad also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Paramount Corporation Berhad has lifted its dividend by approximately 2.4% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Paramount Corporation Berhad is keeping back more of its profits to grow the business.
To Sum It Up
Is Paramount Corporation Berhad an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that Paramount Corporation Berhad is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.