Powermatic Data Systems Limited (SGX:BCY) Looks Interesting, And It's About To Pay A Dividend
Powermatic Data Systems Limited (SGX:BCY) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Powermatic Data Systems' shares before the 16th of August in order to receive the dividend, which the company will pay on the 25th of August.
The company's next dividend payment will be S$0.10 per share, and in the last 12 months, the company paid a total of S$0.10 per share. Based on the last year's worth of payments, Powermatic Data Systems has a trailing yield of 3.4% on the current stock price of SGD2.9. If you buy this business for its dividend, you should have an idea of whether Powermatic Data Systems's dividend is reliable and sustainable. So we need to investigate whether Powermatic Data Systems can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Powermatic Data Systems
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. Powermatic Data Systems has a low and conservative payout ratio of just 18% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 17% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit Powermatic Data Systems 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, Powermatic Data Systems's earnings per share have been growing at 16% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Powermatic Data Systems has increased its dividend at approximately 7.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Is Powermatic Data Systems worth buying for its dividend? Powermatic Data Systems has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Powermatic Data Systems, and we would prioritise taking a closer look at it.
So while Powermatic Data Systems looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 2 warning signs for Powermatic Data Systems that you should be aware of before investing in their shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.
