Carlsberg Brewery Malaysia Berhad (KLSE:CARLSBG) Goes Ex-Dividend Soon

Carlsberg Brewery Malaysia Berhad (KLSE:CARLSBG) stock is about to trade ex-dividend in 3 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. 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. Thus, you can purchase Carlsberg Brewery Malaysia Berhad's shares before the 6th of December in order to receive the dividend, which the company will pay on the 7th of January.

The company's upcoming dividend is RM00.23 a share, following on from the last 12 months, when the company distributed a total of RM0.93 per share to shareholders. Based on the last year's worth of payments, Carlsberg Brewery Malaysia Berhad has a trailing yield of 4.4% on the current stock price of RM020.92. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Carlsberg Brewery Malaysia Berhad can afford its dividend, and if the dividend could grow.

See our latest analysis for Carlsberg Brewery Malaysia 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. It paid out 87% 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. It could become a concern if earnings started 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. It paid out 96% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

Carlsberg Brewery Malaysia Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Carlsberg Brewery Malaysia Berhad to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Carlsberg Brewery Malaysia Berhad, with earnings per share up 3.9% on average over the last five years. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Carlsberg Brewery Malaysia Berhad has delivered 4.3% dividend growth per year on average over the past 10 years. 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.

The Bottom Line

Is Carlsberg Brewery Malaysia Berhad worth buying for its dividend? Earnings per share have grown somewhat, although Carlsberg Brewery Malaysia Berhad paid out over half its profits and the dividend was not well covered by free cash flow. It's not that we think Carlsberg Brewery Malaysia Berhad is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in Carlsberg Brewery Malaysia Berhad and want to know more, you'll find it very useful to know what risks this stock faces. For example - Carlsberg Brewery Malaysia Berhad has 1 warning sign we think you should be aware of.

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.