Muhibbah Engineering (M) Bhd. (KLSE:MUHIBAH) Looks Interesting, And It's About To Pay A Dividend

Muhibbah Engineering (M) Bhd. (KLSE:MUHIBAH) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be two business days 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Muhibbah Engineering (M) Bhd investors that purchase the stock on or after the 31st of July will not receive the dividend, which will be paid on the 15th of August.

The company's next dividend payment will be RM00.03 per share. Last year, in total, the company distributed RM0.03 to shareholders. Based on the last year's worth of payments, Muhibbah Engineering (M) Bhd stock has a trailing yield of around 4.9% on the current share price of RM00.615. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Muhibbah Engineering (M) Bhd paid out a comfortable 27% of its profit last year.

Check out our latest analysis for Muhibbah Engineering (M) Bhd

Click here to see how much of its profit Muhibbah Engineering (M) Bhd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Muhibbah Engineering (M) Bhd earnings per share are up 9.2% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Muhibbah Engineering (M) Bhd's dividend payments per share have declined at 2.8% per year on average over the past 10 years, which is uninspiring. Muhibbah Engineering (M) Bhd is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Is Muhibbah Engineering (M) Bhd worth buying for its dividend? Muhibbah Engineering (M) Bhd has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. Muhibbah Engineering (M) Bhd ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

While it's tempting to invest in Muhibbah Engineering (M) Bhd for the dividends alone, you should always be mindful of the risks involved. Be aware that Muhibbah Engineering (M) Bhd is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning...

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.

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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.