Only Four Days Left To Cash In On Hap Seng Consolidated Berhad's (KLSE:HAPSENG) Dividend

Readers hoping to buy Hap Seng Consolidated Berhad (KLSE:HAPSENG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 9th of December in order to receive the dividend, which the company will pay on the 22nd of December.

Hap Seng Consolidated Berhad's upcoming dividend is RM0.15 a share, following on from the last 12 months, when the company distributed a total of RM0.25 per share to shareholders. Calculating the last year's worth of payments shows that Hap Seng Consolidated Berhad has a trailing yield of 3.0% on the current share price of MYR8.3. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Hap Seng Consolidated Berhad can afford its dividend, and if the dividend could grow.

See our latest analysis for Hap Seng Consolidated Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hap Seng Consolidated Berhad paid out 58% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (73%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Hap Seng Consolidated Berhad's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Hap Seng Consolidated Berhad paid out over the last 12 months.

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. This is why it's a relief to see Hap Seng Consolidated Berhad earnings per share are up 3.4% per annum over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hap Seng Consolidated Berhad has delivered an average of 20% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Has Hap Seng Consolidated Berhad got what it takes to maintain its dividend payments? Earnings per share have been growing modestly and Hap Seng Consolidated Berhad paid out a bit over half of its earnings and free cash flow last year. In summary, while it has some positive characteristics, we're not inclined to race out and buy Hap Seng Consolidated Berhad today.

If you're not too concerned about Hap Seng Consolidated Berhad's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. Be aware that Hap Seng Consolidated Berhad is showing 3 warning signs in our investment analysis, and 1 of those is a bit concerning...

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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