[ad_1]
Keck Seng (Malaysia) Berhad (KLSE:KSENG) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company’s record date, 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 Keck Seng (Malaysia) Berhad’s shares before the 12th of October to receive the dividend, which will be paid on the 26th of October.
The company’s next dividend payment will be RM0.05 per share, and in the last 12 months, the company paid a total of RM0.14 per share. Looking at the last 12 months of distributions, Keck Seng (Malaysia) Berhad has a trailing yield of approximately 3.3% on its current stock price of MYR4.23. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Keck Seng (Malaysia) Berhad can afford its dividend, and if the dividend could grow.
View our latest analysis for Keck Seng (Malaysia) Berhad
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. Keck Seng (Malaysia) Berhad has a low and conservative payout ratio of just 24% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 25% of its free cash flow as dividends last year, which is conservatively low.
It’s positive to see that Keck Seng (Malaysia) Berhad’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Keck Seng (Malaysia) Berhad paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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 Keck Seng (Malaysia) Berhad’s earnings have been skyrocketing, up 56% per annum for the past five years. Keck Seng (Malaysia) Berhad looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Keck Seng (Malaysia) Berhad has delivered an average of 3.4% per year annual increase in its dividend, based on the past 10 years of dividend payments. It’s good to see both earnings and the dividend have improved – although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.
The Bottom Line
Is Keck Seng (Malaysia) Berhad worth buying for its dividend? It’s great that Keck Seng (Malaysia) Berhad is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It’s disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There’s a lot to like about Keck Seng (Malaysia) Berhad, and we would prioritise taking a closer look at it.
So while Keck Seng (Malaysia) Berhad looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. Case in point: We’ve spotted 2 warning signs for Keck Seng (Malaysia) Berhad you should be aware of.
Generally, we wouldn’t recommend just buying the first dividend stock you see. Here’s a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
[ad_2]
Source link