Three Days Left Until Kumpulan H & L High-Tech Berhad (KLSE:HIGHTEC) Trades Ex-Dividend

Kumpulan H & L High-Tech Berhad (KLSE:HIGHTEC) stock is about to trade ex-dividend in 3 days. The ex-dividend date is commonly two business days 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Kumpulan H & L High-Tech Berhad's shares on or after the 9th of October, you won't be eligible to receive the dividend, when it is paid on the 28th of October.

The company's next dividend payment will be RM00.01 per share. Last year, in total, the company distributed RM0.05 to shareholders. Based on the last year's worth of payments, Kumpulan H & L High-Tech Berhad stock has a trailing yield of around 6.7% on the current share price of RM00.745. If you buy this business for its dividend, you should have an idea of whether Kumpulan H & L High-Tech Berhad's dividend is reliable and sustainable. As a result, readers should always check whether Kumpulan H & L High-Tech Berhad has been able to grow its dividends, or if the dividend might be cut.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Kumpulan H & L High-Tech Berhad's payout ratio is modest, at just 42% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Over the last year, it paid out dividends equivalent to 220% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how Kumpulan H & L High-Tech Berhad intends to continue funding this dividend, or if it could be forced to cut the payment.

Kumpulan H & L High-Tech Berhad does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

Kumpulan H & L High-Tech Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Kumpulan H & L High-Tech Berhad's ability to maintain its dividend.

See our latest analysis for Kumpulan H & L High-Tech Berhad

Click here to see how much of its profit Kumpulan H & L High-Tech 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. Fortunately for readers, Kumpulan H & L High-Tech Berhad's earnings per share have been growing at 19% a year for the past five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, Kumpulan H & L High-Tech Berhad has increased its dividend at approximately 16% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

From a dividend perspective, should investors buy or avoid Kumpulan H & L High-Tech Berhad? We like that Kumpulan H & L High-Tech Berhad has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. All things considered, we are not particularly enthused about Kumpulan H & L High-Tech Berhad from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that Kumpulan H & L High-Tech Berhad is showing 3 warning signs in our investment analysis, and 1 of those is concerning...

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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.