New Hoong Fatt Holdings Berhad (KLSE:NHFATT) Passed Our Checks, And It's About To Pay A RM00.02 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that New Hoong Fatt Holdings Berhad (KLSE:NHFATT) is about to go ex-dividend in just four 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. This means that investors who purchase New Hoong Fatt Holdings Berhad's shares on or after the 10th of September will not receive the dividend, which will be paid on the 3rd of October.

The company's next dividend payment will be RM00.02 per share, and in the last 12 months, the company paid a total of RM0.08 per share. Looking at the last 12 months of distributions, New Hoong Fatt Holdings Berhad has a trailing yield of approximately 4.2% on its current stock price of RM01.90. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether New Hoong Fatt Holdings Berhad can afford its dividend, and if the dividend could grow.

View our latest analysis for New Hoong Fatt Holdings 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 New Hoong Fatt Holdings Berhad paying out a modest 30% 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. Thankfully its dividend payments took up just 36% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that New Hoong Fatt Holdings 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.

Click here to see how much of its profit New Hoong Fatt Holdings Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see New Hoong Fatt Holdings Berhad has grown its earnings rapidly, up 26% a year for the past five years. New Hoong Fatt Holdings Berhad is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, New Hoong Fatt Holdings Berhad has lifted its dividend by approximately 3.1% a year on average. Earnings per share have been growing much quicker than dividends, potentially because New Hoong Fatt Holdings Berhad is keeping back more of its profits to grow the business.

Final Takeaway

From a dividend perspective, should investors buy or avoid New Hoong Fatt Holdings Berhad? It's great that New Hoong Fatt Holdings Berhad is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Overall we think this is an attractive combination and worthy of further research.

So while New Hoong Fatt Holdings Berhad looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - New Hoong Fatt Holdings Berhad has 2 warning signs we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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.