Kerjaya Prospek Group Berhad (KLSE:KERJAYA) Is About To Go Ex-Dividend, And It Pays A 3.2% Yield

Readers hoping to buy Kerjaya Prospek Group Berhad (KLSE:KERJAYA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 10th of December, you won't be eligible to receive this dividend, when it is paid on the 6th of January.

Kerjaya Prospek Group Berhad's upcoming dividend is RM0.015 a share, following on from the last 12 months, when the company distributed a total of RM0.035 per share to shareholders. Based on the last year's worth of payments, Kerjaya Prospek Group Berhad stock has a trailing yield of around 3.2% on the current share price of MYR1.1. 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 check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Kerjaya Prospek Group Berhad

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. Kerjaya Prospek Group Berhad paid out a comfortable 44% of its profit last year. 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. Kerjaya Prospek Group Berhad paid out more free cash flow than it generated - 130%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

Kerjaya Prospek Group 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.

While Kerjaya Prospek Group Berhad's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Kerjaya Prospek Group Berhad's ability to maintain its dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Kerjaya Prospek Group Berhad's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Kerjaya Prospek Group Berhad has seen its dividend decline 0.6% per annum on average over the past seven years, which is not great to see.

Final Takeaway

Is Kerjaya Prospek Group Berhad worth buying for its dividend? Earnings per share have been effectively flat over this time, and Kerjaya Prospek Group Berhad's paying out less than half its profits and 130% of its cash flow. Only rarely do we find companies paying out a low percentage of their profits yet a high percentage of their cash flow, so we'd mark this as a concern. To summarise, Kerjaya Prospek Group Berhad looks okay on this analysis, although it doesn't appear a stand-out opportunity.

However if you're still interested in Kerjaya Prospek Group Berhad as a potential investment, you should definitely consider some of the risks involved with Kerjaya Prospek Group Berhad. Our analysis shows 1 warning sign for Kerjaya Prospek Group Berhad and you should be aware of this before buying any shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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