Should You Buy Hong Leong Capital Berhad (KLSE:HLCAP) For Its Upcoming Dividend?

Hong Leong Capital Berhad (KLSE:HLCAP) is about to trade ex-dividend in the next 4 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Hong Leong Capital Berhad's shares before the 30th of October to receive the dividend, which will be paid on the 20th of November.

The company's upcoming dividend is RM00.22 a share, following on from the last 12 months, when the company distributed a total of RM0.22 per share to shareholders. Calculating the last year's worth of payments shows that Hong Leong Capital Berhad has a trailing yield of 4.8% on the current share price of RM04.55. If you buy this business for its dividend, you should have an idea of whether Hong Leong Capital Berhad's dividend is reliable and sustainable. So we need to investigate whether Hong Leong Capital Berhad can afford its dividend, and if the dividend could grow.

View our latest analysis for Hong Leong Capital Berhad

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. Hong Leong Capital Berhad is paying out an acceptable 53% of its profit, a common payout level among most companies.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Hong Leong Capital 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. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Hong Leong Capital Berhad earnings per share are up 8.2% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Hong Leong Capital Berhad has lifted its dividend by approximately 3.9% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Has Hong Leong Capital Berhad got what it takes to maintain its dividend payments? Hong Leong Capital Berhad has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. We think there are likely better opportunities out there.

If you're not too concerned about Hong Leong Capital Berhad's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To that end, you should learn about the 2 warning signs we've spotted with Hong Leong Capital Berhad (including 1 which shouldn'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.