Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Dasin Retail Trust (SGX:CEDU) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 21st of August, you won't be eligible to receive this dividend, when it is paid on the 27th of September.
Dasin Retail Trust's next dividend payment will be S$0.034 per share. Last year, in total, the company distributed S$0.072 to shareholders. Calculating the last year's worth of payments shows that Dasin Retail Trust has a trailing yield of 8.3% on the current share price of SGD0.875. 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 investigate whether Dasin Retail Trust can afford its dividend, and if the dividend could grow.
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. Dasin Retail Trust paid out a comfortable 46% of its profit last year. That said, REITs are often required by law to distribute all of their earnings, and it's not unusual to see a REIT with a payout ratio around 100%. We wouldn't read too much into this. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Dasin Retail Trust didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Fortunately, it paid out only 46% of its free cash flow in the past year.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. Dasin Retail Trust reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 2 years, Dasin Retail Trust has increased its dividend at approximately 9.5% a year on average.
To Sum It Up
Has Dasin Retail Trust got what it takes to maintain its dividend payments? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Dasin Retail Trust's dividend merits.
Keen to explore more data on Dasin Retail Trust's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.