Should You Buy Kumpulan Perangsang Selangor Berhad (KLSE:KPS) For Its Upcoming Dividend?

Readers hoping to buy Kumpulan Perangsang Selangor Berhad (KLSE:KPS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. In other words, investors can purchase Kumpulan Perangsang Selangor Berhad's shares before the 15th of April in order to be eligible for the dividend, which will be paid on the 30th of April.

The company's upcoming dividend is RM00.045 a share, following on from the last 12 months, when the company distributed a total of RM0.035 per share to shareholders. Looking at the last 12 months of distributions, Kumpulan Perangsang Selangor Berhad has a trailing yield of approximately 4.3% on its current stock price of RM00.81. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Kumpulan Perangsang Selangor Berhad has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Kumpulan Perangsang Selangor 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. Kumpulan Perangsang Selangor Berhad paid out a comfortable 33% of its profit last year. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Luckily it paid out just 14% of its free cash flow last year.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Kumpulan Perangsang Selangor Berhad reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

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, Kumpulan Perangsang Selangor Berhad has lifted its dividend by approximately 6.5% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

We update our analysis on Kumpulan Perangsang Selangor Berhad every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Kumpulan Perangsang Selangor Berhad an attractive dividend stock, or better left on the shelf? It's hard to get used to Kumpulan Perangsang Selangor Berhad paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Kumpulan Perangsang Selangor Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Kumpulan Perangsang Selangor Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Kumpulan Perangsang Selangor Berhad has 2 warning signs we think you should be aware of.

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.