Samchem Holdings Berhad (KLSE:SAMCHEM) Passed Our Checks, And It's About To Pay A RM0.012 Dividend

Samchem Holdings Berhad (KLSE:SAMCHEM) stock is about to trade ex-dividend in 3 days. Investors can purchase shares before the 4th of December in order to be eligible for this dividend, which will be paid on the 22nd of December.

Samchem Holdings Berhad's next dividend payment will be RM0.012 per share. Last year, in total, the company distributed RM0.048 to shareholders. Last year's total dividend payments show that Samchem Holdings Berhad has a trailing yield of 4.3% on the current share price of MYR1.12. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Samchem 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. Samchem Holdings Berhad has a low and conservative payout ratio of just 9.2% of its income after tax. A useful secondary check can be to evaluate whether Samchem Holdings Berhad generated enough free cash flow to afford its dividend. The good news is it paid out just 11% of its free cash flow in the last year.

It's positive to see that Samchem Holdings 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 Samchem Holdings Berhad 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Samchem Holdings Berhad's earnings have been skyrocketing, up 38% per annum for the past five years. Samchem Holdings Berhad earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Samchem Holdings Berhad has delivered 13% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Should investors buy Samchem Holdings Berhad for the upcoming dividend? It's great that Samchem Holdings Berhad is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Samchem Holdings Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Samchem Holdings Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 4 warning signs for Samchem Holdings Berhad that you should be aware of before investing in their shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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