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GFM Services Berhad (KLSE:GFM) Passed Our Checks, And It's About To Pay A RM00.0031 Dividend
GFM Services Berhad (KLSE:GFM) stock is about to trade ex-dividend in three days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Meaning, you will need to purchase GFM Services Berhad's shares before the 17th of July to receive the dividend, which will be paid on the 18th of August.
The company's next dividend payment will be RM00.0031 per share, on the back of last year when the company paid a total of RM0.012 to shareholders. Based on the last year's worth of payments, GFM Services Berhad stock has a trailing yield of around 6.1% on the current share price of RM00.205. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether GFM Services Berhad has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately GFM Services Berhad's payout ratio is modest, at just 32% of profit. A useful secondary check can be to evaluate whether GFM Services Berhad generated enough free cash flow to afford its dividend. Fortunately, it paid out only 30% of its free cash flow in the past year.
It's positive to see that GFM Services 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 GFM Services Berhad
Click here to see how much of its profit GFM Services 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. For this reason, we're glad to see GFM Services Berhad's earnings per share have risen 20% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. GFM Services Berhad has seen its dividend decline 1.8% per annum on average over the past eight years, which is not great to see.
To Sum It Up
Has GFM Services Berhad got what it takes to maintain its dividend payments? It's great that GFM Services 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. GFM Services 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 that end, you should learn about the 3 warning signs we've spotted with GFM Services Berhad (including 1 which can't be ignored).
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
About KLSE:GFM
GFM Services Berhad
An investment holding company, provides integrated facilities management, facility, and advisory services in Malaysia.
Good value average dividend payer.
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