Should Income Investors Look At RCE Capital Berhad (KLSE:RCECAP) Before Its Ex-Dividend?

It looks like RCE Capital Berhad (KLSE:RCECAP) is about to go ex-dividend in the next four days. The ex-dividend date is one business day 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase RCE Capital Berhad's shares before the 17th of December in order to receive the dividend, which the company will pay on the 31st of December.

The company's next dividend payment will be RM00.03 per share, and in the last 12 months, the company paid a total of RM0.075 per share. Looking at the last 12 months of distributions, RCE Capital Berhad has a trailing yield of approximately 4.7% on its current stock price of RM01.59. If you buy this business for its dividend, you should have an idea of whether RCE Capital Berhad's dividend is reliable and sustainable. So we need to investigate whether RCE Capital Berhad can afford its dividend, and if the dividend could grow.

View our latest analysis for RCE Capital Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 78% 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 worried about the risk of a drop in earnings.

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 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 RCE Capital Berhad, with earnings per share up 2.5% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. RCE Capital Berhad has delivered an average of 17% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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

Should investors buy RCE Capital Berhad for the upcoming dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

If you want to look further into RCE Capital Berhad, it's worth knowing the risks this business faces. Our analysis shows 2 warning signs for RCE Capital Berhad that we strongly recommend you have a look at before investing in the company.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.