We Wouldn't Be Too Quick To Buy Bank Islam Malaysia Berhad (KLSE:BIMB) Before It Goes Ex-Dividend

Bank Islam Malaysia Berhad (KLSE:BIMB) stock is about to trade ex-dividend in 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Bank Islam Malaysia Berhad's shares before the 14th of April in order to be eligible for the dividend, which will be paid on the 12th of May.

The company's upcoming dividend is RM0.034 a share, following on from the last 12 months, when the company distributed a total of RM0.10 per share to shareholders. Calculating the last year's worth of payments shows that Bank Islam Malaysia Berhad has a trailing yield of 6.4% on the current share price of MYR2.16. 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 Bank Islam Malaysia Berhad has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Bank Islam Malaysia Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Bank Islam Malaysia Berhad is paying out an acceptable 60% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Bank Islam Malaysia Berhad's earnings per share have remained effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

Given that Bank Islam Malaysia Berhad has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

Has Bank Islam Malaysia Berhad got what it takes to maintain its dividend payments? Earnings per share have not grown at all, and the company pays out a bit over half its profits to shareholders. Bank Islam Malaysia Berhad doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.

With that in mind though, if the poor dividend characteristics of Bank Islam Malaysia Berhad don't faze you, it's worth being mindful of the risks involved with this business. In terms of investment risks, we've identified 2 warning signs with Bank Islam Malaysia Berhad and understanding them should be part of your investment process.

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.