Here's Why We're Wary Of Buying Gabungan AQRS Berhad's (KLSE:GBGAQRS) For Its Upcoming 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 Gabungan AQRS Berhad (KLSE:GBGAQRS) is about to go ex-dividend in just 3 days. Ex-dividend means that investors that purchase the stock on or after the 17th of December will not receive this dividend, which will be paid on the 7th of January.

Gabungan AQRS Berhad's upcoming dividend is RM0.01 a share, following on from the last 12 months, when the company distributed a total of RM0.02 per share to shareholders. Calculating the last year's worth of payments shows that Gabungan AQRS Berhad has a trailing yield of 2.7% on the current share price of MYR0.73. 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! So we need to investigate whether Gabungan AQRS Berhad can afford its dividend, and if the dividend could grow.

View our latest analysis for Gabungan AQRS Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Gabungan AQRS Berhad's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover.

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. Gabungan AQRS Berhad was unprofitable last year, but at least the general trend suggests its earnings have 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, seven years ago, Gabungan AQRS Berhad has lifted its dividend by approximately 3.6% a year on average.

Get our latest analysis on Gabungan AQRS Berhad's balance sheet health here.

Final Takeaway

Should investors buy Gabungan AQRS Berhad for the upcoming dividend? In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

However if you're still interested in Gabungan AQRS Berhad as a potential investment, you should definitely consider some of the risks involved with Gabungan AQRS Berhad. For example, we've found 3 warning signs for Gabungan AQRS Berhad (1 doesn't sit too well with us!) that deserve your attention before investing in the shares.

If you're in the market for dividend stocks, we recommend checking our list of top 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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