Yahoo Finance Read This Before Considering KPJ Healthcare Berhad (KLSE:KPJ) For Its Upcoming RM0.01 Dividend
KPJ Healthcare Berhad (KLSE:KPJ) is about to trade ex-dividend in the next 4 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. In other words, investors can purchase KPJ Healthcare Berhad's shares before the 12th of December in order to be eligible for the dividend, which will be paid on the 28th of December.
The company's upcoming dividend is RM0.01 a share, following on from the last 12 months, when the company distributed a total of RM0.02 per share to shareholders. Calculating the last year's worth of payments shows that KPJ Healthcare Berhad has a trailing yield of 2.1% on the current share price of MYR0.97. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
View our latest analysis for KPJ Healthcare Berhad
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see KPJ Healthcare Berhad paying out a modest 46% of its earnings. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 15% of its cash flow last year.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. So we're not too excited that KPJ Healthcare Berhad's earnings are down 4.5% 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. It looks like the KPJ Healthcare Berhad dividends are largely the same as they were 10 years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.
Final Takeaway
Has KPJ Healthcare Berhad got what it takes to maintain its dividend payments? 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. In summary, while it has some positive characteristics, we're not inclined to race out and buy KPJ Healthcare Berhad today.
While it's tempting to invest in KPJ Healthcare Berhad for the dividends alone, you should always be mindful of the risks involved. Be aware that KPJ Healthcare Berhad is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning...
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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