Be Sure To Check Out Metrod Holdings Berhad (KLSE:METROD) Before It Goes Ex-Dividend

Metrod Holdings Berhad (KLSE:METROD) stock is about to trade ex-dividend in 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Thus, you can purchase Metrod Holdings Berhad's shares before the 25th of July in order to receive the dividend, which the company will pay on the 23rd of August.

The company's next dividend payment will be RM00.06 per share, on the back of last year when the company paid a total of RM0.06 to shareholders. Looking at the last 12 months of distributions, Metrod Holdings Berhad has a trailing yield of approximately 3.9% on its current stock price of RM01.52. 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 Metrod Holdings Berhad can afford its dividend, and if the dividend could grow.

View our latest analysis for Metrod Holdings 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. Fortunately Metrod Holdings Berhad's payout ratio is modest, at just 49% of profit. 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. Luckily it paid out just 3.4% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Metrod Holdings 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 Metrod Holdings Berhad earnings per share are up 10.0% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. It looks like the Metrod Holdings Berhad dividends are largely the same as they were 10 years ago.

The Bottom Line

From a dividend perspective, should investors buy or avoid Metrod Holdings Berhad? Earnings per share growth has been growing somewhat, and Metrod Holdings Berhad is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Metrod Holdings Berhad is being conservative with its dividend payouts and could still perform reasonably over the long run. Metrod Holdings Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 3 warning signs for Metrod Holdings Berhad that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com