Sunway Construction Group Berhad (KLSE:SUNCON) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Sunway Construction Group Berhad (KLSE:SUNCON) is about to trade ex-dividend in the next 4 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a 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. Thus, you can purchase Sunway Construction Group Berhad's shares before the 10th of September in order to receive the dividend, which the company will pay on the 25th of September.

The company's upcoming dividend is RM00.0725 a share, following on from the last 12 months, when the company distributed a total of RM0.10 per share to shareholders. Based on the last year's worth of payments, Sunway Construction Group Berhad stock has a trailing yield of around 1.6% on the current share price of RM06.45. 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! We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Its dividend payout ratio is 81% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. A useful secondary check can be to evaluate whether Sunway Construction Group 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 Sunway Construction Group 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.

View our latest analysis for Sunway Construction Group Berhad

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

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. For this reason, we're glad to see Sunway Construction Group Berhad's earnings per share have risen 16% per annum over the last five years. It paid out more than three-quarters of its earnings in the last year, even though earnings per share are growing rapidly. We're surprised that management has not elected to reinvest more in the business to accelerate growth further.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last nine years, Sunway Construction Group Berhad has lifted its dividend by approximately 11% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

From a dividend perspective, should investors buy or avoid Sunway Construction Group Berhad? Sunway Construction Group Berhad's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. Sunway Construction Group Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Wondering what the future holds for Sunway Construction Group Berhad? See what the 15 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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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.