Don't Race Out To Buy George Kent (Malaysia) Berhad (KLSE:GKENT) Just Because It's Going Ex-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 George Kent (Malaysia) Berhad (KLSE:GKENT) is about to go ex-dividend in just 3 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. In other words, investors can purchase George Kent (Malaysia) Berhad's shares before the 15th of December in order to be eligible for the dividend, which will be paid on the 8th of January.

The company's next dividend payment will be RM0.0075 per share, and in the last 12 months, the company paid a total of RM0.015 per share. Based on the last year's worth of payments, George Kent (Malaysia) Berhad stock has a trailing yield of around 3.2% on the current share price of MYR0.47. If you buy this business for its dividend, you should have an idea of whether George Kent (Malaysia) Berhad's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for George Kent (Malaysia) Berhad

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. George Kent (Malaysia) 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. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It distributed 38% of its free cash flow as dividends, a comfortable payout level for most companies.

Click here to see how much of its profit George Kent (Malaysia) Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. George Kent (Malaysia) Berhad was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. George Kent (Malaysia) Berhad's dividend payments per share have declined at 5.4% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Get our latest analysis on George Kent (Malaysia) Berhad's balance sheet health here.

To Sum It Up

Is George Kent (Malaysia) Berhad an attractive dividend stock, or better left on the shelf? We're a bit uncomfortable with it paying a dividend while being loss-making. However, we note that the dividend was covered by cash flow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

So if you're still interested in George Kent (Malaysia) Berhad despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. We've identified 3 warning signs with George Kent (Malaysia) Berhad (at least 1 which can't be ignored), 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.