There's A Lot To Like About Hibiscus Petroleum Berhad's (KLSE:HIBISCS) Upcoming RM00.03 Dividend

It looks like Hibiscus Petroleum Berhad (KLSE:HIBISCS) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Hibiscus Petroleum Berhad's shares on or after the 26th of December will not receive the dividend, which will be paid on the 22nd of January.

The company's upcoming dividend is RM00.03 a share, following on from the last 12 months, when the company distributed a total of RM0.085 per share to shareholders. Based on the last year's worth of payments, Hibiscus Petroleum Berhad stock has a trailing yield of around 4.4% on the current share price of RM01.92. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Hibiscus Petroleum Berhad has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Hibiscus Petroleum 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. Hibiscus Petroleum Berhad paid out just 17% 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. What's good is that dividends were well covered by free cash flow, with the company paying out 15% of its cash flow last year.

It's positive to see that Hibiscus Petroleum 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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Hibiscus Petroleum Berhad, with earnings per share up 7.1% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hibiscus Petroleum Berhad has delivered 36% dividend growth per year on average over the past four years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Is Hibiscus Petroleum Berhad an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Hibiscus Petroleum Berhad is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Hibiscus Petroleum Berhad is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Hibiscus Petroleum Berhad is facing. To that end, you should learn about the 2 warning signs we've spotted with Hibiscus Petroleum Berhad (including 1 which is a bit unpleasant).

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.