Why You Might Be Interested In Dayang Enterprise Holdings Bhd (KLSE:DAYANG) For Its Upcoming Dividend

Readers hoping to buy Dayang Enterprise Holdings Bhd (KLSE:DAYANG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. Thus, you can purchase Dayang Enterprise Holdings Bhd's shares before the 6th of March in order to receive the dividend, which the company will pay on the 17th of March.

The company's next dividend payment will be RM00.07 per share, on the back of last year when the company paid a total of RM0.06 to shareholders. Last year's total dividend payments show that Dayang Enterprise Holdings Bhd has a trailing yield of 8.0% on the current share price of RM01.76. If you buy this business for its dividend, you should have an idea of whether Dayang Enterprise Holdings Bhd's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Dayang Enterprise Holdings Bhd

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. That's why it's good to see Dayang Enterprise Holdings Bhd paying out a modest 37% of its earnings. A useful secondary check can be to evaluate whether Dayang Enterprise Holdings Bhd generated enough free cash flow to afford its dividend. Luckily it paid out just 18% of its free cash flow last year.

It's positive to see that Dayang Enterprise Holdings Bhd'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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Dayang Enterprise Holdings Bhd earnings per share are up 2.4% per annum over the last five years. Recent earnings growth has been limited. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Dayang Enterprise Holdings Bhd has lifted its dividend by approximately 7.2% 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.

The Bottom Line

From a dividend perspective, should investors buy or avoid Dayang Enterprise Holdings Bhd? Earnings per share growth has been growing somewhat, and Dayang Enterprise Holdings Bhd is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Dayang Enterprise Holdings Bhd is halfway there. It's a promising combination that should mark this company worthy of closer attention.

So while Dayang Enterprise Holdings Bhd looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 2 warning signs for Dayang Enterprise Holdings Bhd (of which 1 is a bit concerning!) you should know about.

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.