It looks like Scientex Packaging (Ayer Keroh) Berhad (KLSE:SCIPACK) is about to go ex-dividend in the next 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Scientex Packaging (Ayer Keroh) Berhad investors that purchase the stock on or after the 4th of July will not receive the dividend, which will be paid on the 17th of July.
The company’s next dividend payment will be RM00.025 per share, and in the last 12 months, the company paid a total of RM0.05 per share. Looking at the last 12 months of distributions, Scientex Packaging (Ayer Keroh) Berhad has a trailing yield of approximately 2.4% on its current stock price of RM02.08. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Scientex Packaging (Ayer Keroh) Berhad has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Scientex Packaging (Ayer Keroh) Berhad
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. Scientex Packaging (Ayer Keroh) Berhad is paying out an acceptable 68% of its profit, a common payout level among most companies. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What’s good is that dividends were well covered by free cash flow, with the company paying out 19% of its cash flow last year.
It’s positive to see that Scientex Packaging (Ayer Keroh) 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.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It’s not encouraging to see that Scientex Packaging (Ayer Keroh) Berhad’s earnings are effectively flat over the past five years. It’s better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.
Scientex Packaging (Ayer Keroh) Berhad also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus – perpetually pushing a boulder uphill.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Scientex Packaging (Ayer Keroh) Berhad’s dividend payments are effectively flat on where they were 10 years ago.
To Sum It Up
Should investors buy Scientex Packaging (Ayer Keroh) Berhad for the upcoming dividend? We’re not enthused by the flat earnings per share, although at least the company’s payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. Overall, it’s hard to get excited about Scientex Packaging (Ayer Keroh) Berhad from a dividend perspective.
So if you want to do more digging on Scientex Packaging (Ayer Keroh) Berhad, you’ll find it worthwhile knowing the risks that this stock faces. Every company has risks, and we’ve spotted 3 warning signs for Scientex Packaging (Ayer Keroh) Berhad (of which 1 makes us a bit uncomfortable!) you should know about.
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.
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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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
