Yahoo Finance Here's What We Like About TORM plc's (CPH:TRMD A) Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that TORM plc (CPH:TRMD A) is about to go ex-dividend in just 2 days. You can purchase shares before the 17th of April in order to receive the dividend, which the company will pay on the 6th of May.
TORM's next dividend payment will be ø0.10 per share, and in the last 12 months, the company paid a total of ø0.10 per share. Calculating the last year's worth of payments shows that TORM has a trailing yield of 1.4% on the current share price of DKK47.85. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for TORM
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. TORM paid out just 4.5% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. TORM paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.
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 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 comforting to see TORM's earnings have been skyrocketing, up 41% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. TORM's dividend payments per share have declined at 41% per year on average over the past four years, which is uninspiring. TORM 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
Has TORM got what it takes to maintain its dividend payments? Companies like TORM that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating TORM more closely.
On that note, you'll want to research what risks TORM is facing. We've identified 4 warning signs with TORM (at least 3 which shouldn't be ignored), and understanding them should be part of your investment process.
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.
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.
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. Thank you for reading.
