Malaysia Smelting Corporation Berhad (KLSE:MSC) Will Pay A RM0.07 Dividend In Four Days

Malaysia Smelting Corporation Berhad (KLSE:MSC) is about to trade ex-dividend in the next 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Malaysia Smelting Corporation Berhad’s shares on or after the 13th of September, you won’t be eligible to receive the dividend, when it is paid on the 29th of September.

The company’s next dividend payment will be RM0.07 per share. Last year, in total, the company distributed RM0.14 to shareholders. Based on the last year’s worth of payments, Malaysia Smelting Corporation Berhad has a trailing yield of 6.1% on the current stock price of MYR2.3. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Malaysia Smelting Corporation Berhad has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Malaysia Smelting Corporation 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. Malaysia Smelting Corporation Berhad paid out 101% of its earnings, which is more than we’re comfortable with, unless there are mitigating circumstances. 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. The good news is it paid out just 11% of its free cash flow in the last year.

It’s disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Malaysia Smelting Corporation Berhad fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we’d be concerned. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It’s encouraging to see Malaysia Smelting Corporation Berhad has grown its earnings rapidly, up 28% a year for the past five years.

Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Malaysia Smelting Corporation Berhad has delivered an average of 38% per year annual increase in its dividend, based on the past six years of dividend payments. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Malaysia Smelting Corporation Berhad an attractive dividend stock, or better left on the shelf? Earnings per share have been rising nicely although, even though its cashflow payout ratio is low, we question why Malaysia Smelting Corporation Berhad is paying out so much of its profit. All things considered, we are not particularly enthused about Malaysia Smelting Corporation Berhad from a dividend perspective.

On that note, you’ll want to research what risks Malaysia Smelting Corporation Berhad is facing. In terms of investment risks, we’ve identified 2 warning signs with Malaysia Smelting Corporation Berhad and understanding them should be part of your investment process.

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.