Only Four Days Left To Cash In On EITA Resources Berhad's (KLSE:EITA) Dividend

Readers hoping to buy EITA Resources Berhad (KLSE:EITA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 14th of December will not receive the dividend, which will be paid on the 8th of January.

EITA Resources Berhad's upcoming dividend is RM0.03 a share, following on from the last 12 months, when the company distributed a total of RM0.06 per share to shareholders. Based on the last year's worth of payments, EITA Resources Berhad stock has a trailing yield of around 3.2% on the current share price of MYR1.88. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for EITA Resources Berhad

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. EITA Resources Berhad paid out a comfortable 45% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 58% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see EITA Resources Berhad's earnings per share have been shrinking at 2.4% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past nine years, EITA Resources Berhad has increased its dividend at approximately 8.0% a year on average.

The Bottom Line

Is EITA Resources Berhad worth buying for its dividend? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you want to look further into EITA Resources Berhad, it's worth knowing the risks this business faces. For example, we've found 3 warning signs for EITA Resources Berhad that we recommend you consider before investing in the business.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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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