There's A Lot To Like About DKSH Holdings (Malaysia) Berhad's (KLSE:DKSH) Upcoming RM00.17 Dividend

Readers hoping to buy DKSH Holdings (Malaysia) Berhad (KLSE:DKSH) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase DKSH Holdings (Malaysia) Berhad's shares before the 2nd of July to receive the dividend, which will be paid on the 18th of July.

The company's upcoming dividend is RM00.17 a share, following on from the last 12 months, when the company distributed a total of RM0.17 per share to shareholders. Based on the last year's worth of payments, DKSH Holdings (Malaysia) Berhad has a trailing yield of 3.2% on the current stock price of RM05.35. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for DKSH Holdings (Malaysia) Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. DKSH Holdings (Malaysia) Berhad paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether DKSH Holdings (Malaysia) Berhad generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 32% of the free cash flow it generated, which is a comfortable payout ratio.

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 consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see DKSH Holdings (Malaysia) Berhad has grown its earnings rapidly, up 21% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. DKSH Holdings (Malaysia) Berhad has seen its dividend decline 2.8% per annum on average over the past 10 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.

Final Takeaway

Should investors buy DKSH Holdings (Malaysia) Berhad for the upcoming dividend? It's great that DKSH Holdings (Malaysia) 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. DKSH Holdings (Malaysia) Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while DKSH Holdings (Malaysia) Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 2 warning signs for DKSH Holdings (Malaysia) Berhad (of which 1 is concerning!) you should know about.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com