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

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Poh Kong Holdings Berhad (KLSE:POHKONG) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 18th of February in order to receive the dividend, which the company will pay on the 12th of March.

Poh Kong Holdings Berhad's next dividend payment will be RM0.012 per share. Last year, in total, the company distributed RM0.012 to shareholders. Based on the last year's worth of payments, Poh Kong Holdings Berhad has a trailing yield of 1.5% on the current stock price of MYR0.82. If you buy this business for its dividend, you should have an idea of whether Poh Kong Holdings Berhad's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Poh Kong 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. Poh Kong Holdings Berhad paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 6.1% of its free cash flow last year.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Poh Kong Holdings Berhad's earnings per share have risen 16% 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. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Poh Kong Holdings Berhad's dividend payments per share have declined at 1.5% per year on average over the past 10 years, which is uninspiring.

To Sum It Up

Is Poh Kong Holdings Berhad worth buying for its dividend? It's great that Poh Kong 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. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Poh Kong Holdings Berhad is facing. Every company has risks, and we've spotted 2 warning signs for Poh Kong Holdings Berhad you should know about.

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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