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We Wouldn't Be Too Quick To Buy DRDGOLD Limited (NYSE:DRD) Before It Goes Ex-Dividend

Simply Wall St

Readers hoping to buy DRDGOLD Limited (NYSE:DRD) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 26th of September to receive the dividend, which will be paid on the 10th of October.

DRDGOLD's next dividend payment will be US$0.1 per share, and in the last 12 months, the company paid a total of US$2.0 per share. Last year's total dividend payments show that DRDGOLD has a trailing yield of 3.0% on the current share price of $4.43. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for DRDGOLD

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. DRDGOLD distributed an unsustainably high 169% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious.

Click here to see how much of its profit DRDGOLD paid out over the last 12 months.

NYSE:DRD Historical Dividend Yield, September 22nd 2019

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's not ideal to see DRDGOLD's earnings per share have been shrinking at 4.4% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. DRDGOLD has delivered 7.2% dividend growth per year on average over the past ten years. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. DRDGOLD is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.

The Bottom Line

Is DRDGOLD worth buying for its dividend? Earnings per share are in decline and DRDGOLD is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. DRDGOLD doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

Keen to explore more data on DRDGOLD's financial performance? Check out our visualisation of its historical revenue and earnings growth.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.