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It looks like Petron Malaysia Refining & Marketing Bhd (KLSE:PETRONM) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company’s books as a shareholder in order to receive the 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. Thus, you can purchase Petron Malaysia Refining & Marketing Bhd’s shares before the 19th of June in order to receive the dividend, which the company will pay on the 4th of July.
The company’s next dividend payment will be RM0.25 per share, on the back of last year when the company paid a total of RM0.25 to shareholders. Last year’s total dividend payments show that Petron Malaysia Refining & Marketing Bhd has a trailing yield of 5.0% on the current share price of MYR5. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it’s growing.
See our latest analysis for Petron Malaysia Refining & Marketing Bhd
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Petron Malaysia Refining & Marketing Bhd is paying out just 22% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Thankfully its dividend payments took up just 28% of the free cash flow it generated, which is a comfortable payout ratio.
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.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we’re discomforted by Petron Malaysia Refining & Marketing Bhd’s 5.6% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company’s dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Petron Malaysia Refining & Marketing Bhd has lifted its dividend by approximately 6.0% a year on average.
To Sum It Up
Is Petron Malaysia Refining & Marketing Bhd an attractive dividend stock, or better left on the shelf? Petron Malaysia Refining & Marketing Bhd has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. In summary, it’s hard to get excited about Petron Malaysia Refining & Marketing Bhd from a dividend perspective.
While it’s tempting to invest in Petron Malaysia Refining & Marketing Bhd for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 2 warning signs for Petron Malaysia Refining & Marketing Bhd that we strongly recommend you have a look at before investing in the company.
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.
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