Just Four Days Till 7-Eleven Malaysia Holdings Berhad (KLSE:SEM) Will Be Trading Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see 7-Eleven Malaysia Holdings Berhad (KLSE:SEM) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase 7-Eleven Malaysia Holdings Berhad's shares on or after the 10th of May will not receive the dividend, which will be paid on the 25th of May.

The company's upcoming dividend is RM0.054 a share, following on from the last 12 months, when the company distributed a total of RM0.054 per share to shareholders. Based on the last year's worth of payments, 7-Eleven Malaysia Holdings Berhad has a trailing yield of 2.6% on the current stock price of MYR2.05. If you buy this business for its dividend, you should have an idea of whether 7-Eleven Malaysia 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 7-Eleven Malaysia 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. It paid out 88% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 8.3% of its cash flow last year.

It's positive to see that 7-Eleven Malaysia 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 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. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at 7-Eleven Malaysia Holdings Berhad, with earnings per share up 6.5% on average over the last five years. Decent historical earnings per share growth suggests 7-Eleven Malaysia Holdings Berhad has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past eight years, 7-Eleven Malaysia Holdings Berhad has increased its dividend at approximately 10% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is 7-Eleven Malaysia Holdings Berhad an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest and 7-Eleven Malaysia Holdings Berhad paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. Overall, it's hard to get excited about 7-Eleven Malaysia Holdings Berhad from a dividend perspective.

So while 7-Eleven Malaysia Holdings Berhad looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with 7-Eleven Malaysia Holdings Berhad and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.