Readers hoping to buy Dayang Enterprise Holdings Bhd (KLSE:DAYANG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. This means that investors who purchase Dayang Enterprise Holdings Bhd’s shares on or after the 7th of December will not receive the dividend, which will be paid on the 20th of December.
The company’s next dividend payment will be RM0.015 per share, and in the last 12 months, the company paid a total of RM0.03 per share. Calculating the last year’s worth of payments shows that Dayang Enterprise Holdings Bhd has a trailing yield of 1.9% on the current share price of MYR1.57. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Fortunately Dayang Enterprise Holdings Bhd’s payout ratio is modest, at just 25% of profit. 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 14% of its free cash flow in the last year.
It’s positive to see that Dayang Enterprise Holdings Bhd’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.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Dayang Enterprise Holdings Bhd’s earnings have collapsed faster than Wile E Coyote’s schemes to trap the Road Runner; down a tremendous 34% a year over the past five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Dayang Enterprise Holdings Bhd has seen its dividend decline 7.7% per annum on average over the past 10 years, which is not great to see. While it’s not great that earnings and dividends per share have fallen in recent years, we’re encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
Should investors buy Dayang Enterprise Holdings Bhd for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It’s definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Dayang Enterprise Holdings Bhd looks okay on this analysis, although it doesn’t appear a stand-out opportunity.
Wondering what the future holds for Dayang Enterprise Holdings Bhd? See what the five analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.