Djerriwarrh Investments Limited (ASX:DJW) stock is about to trade ex-dividend in two 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 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 Djerriwarrh Investments' shares before the 2nd of November to receive the dividend, which will be paid on the 25th of November.
The company's next dividend payment will be AU$0.0375 per share, and in the last 12 months, the company paid a total of AU$0.17 per share. Calculating the last year's worth of payments shows that Djerriwarrh Investments has a trailing yield of 5.7% on the current share price of AU$2.99. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year, Djerriwarrh Investments paid out 101% 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.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
See our latest analysis for Djerriwarrh Investments
Click here to see how much of its profit Djerriwarrh Investments paid out over the last 12 months.
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. With that in mind, we're encouraged by the steady growth at Djerriwarrh Investments, with earnings per share up 3.3% on average over the last five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Djerriwarrh Investments has seen its dividend decline 3.4% per annum on average over the past 10 years, which is not great to see. Djerriwarrh Investments 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
Is Djerriwarrh Investments worth buying for its dividend? Djerriwarrh Investments has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
Although, if you're still interested in Djerriwarrh Investments and want to know more, you'll find it very useful to know what risks this stock faces. In terms of investment risks, we've identified 1 warning sign with Djerriwarrh Investments and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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