Superlon Holdings Berhad (KLSE:SUPERLN) Looks Interesting, And It's About To Pay A Dividend

Superlon Holdings Berhad (KLSE:SUPERLN) is about to trade ex-dividend in the next 4 days. Ex-dividend means that investors that purchase the stock on or after the 5th of January will not receive this dividend, which will be paid on the 25th of January.

Superlon Holdings Berhad's upcoming dividend is RM0.011 a share, following on from the last 12 months, when the company distributed a total of RM0.03 per share to shareholders. Calculating the last year's worth of payments shows that Superlon Holdings Berhad has a trailing yield of 3.4% on the current share price of MYR0.9. 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 Superlon Holdings Berhad

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Superlon Holdings Berhad paying out a modest 49% of its earnings. 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 24% of its free cash flow last year.

It's positive to see that Superlon 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 Superlon Holdings Berhad paid out over the last 12 months.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Superlon Holdings Berhad's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Superlon Holdings Berhad has lifted its dividend by approximately 5.7% a year on average.

Final Takeaway

Has Superlon Holdings Berhad got what it takes to maintain its dividend payments? The company has barely grown earnings per share over this time, but at least it's paying out a decently low percentage of its earnings and cashflow as dividends. This could suggest management is reinvesting in future growth opportunities. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine strong earnings per share growth with a low payout ratio, and Superlon Holdings Berhad is halfway there. It's a promising combination that should mark this company worthy of closer attention.

On that note, you'll want to research what risks Superlon Holdings Berhad is facing. For example, we've found 2 warning signs for Superlon Holdings Berhad that we recommend you consider before investing in the business.

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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