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

Carlsberg Brewery Malaysia Berhad (KLSE:CARLSBG) stock is about to trade ex-dividend in three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Meaning, you will need to purchase Carlsberg Brewery Malaysia Berhad's shares before the 12th of December to receive the dividend, which will be paid on the 12th of January.

The company's next dividend payment will be RM00.25 per share, on the back of last year when the company paid a total of RM1.00 to shareholders. Last year's total dividend payments show that Carlsberg Brewery Malaysia Berhad has a trailing yield of 6.0% on the current share price of RM016.70. If you buy this business for its dividend, you should have an idea of whether Carlsberg Brewery Malaysia Berhad's dividend is reliable and sustainable. As a result, readers should always check whether Carlsberg Brewery Malaysia Berhad has been able to grow its dividends, or if the dividend might be cut.

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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. Its dividend payout ratio is 88% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. 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. The company paid out 93% of its free cash flow over the last year, which we think is outside the ideal range 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.

While Carlsberg Brewery Malaysia Berhad's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its 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.

View our latest analysis for Carlsberg Brewery Malaysia Berhad

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. This is why it's a relief to see Carlsberg Brewery Malaysia Berhad earnings per share are up 4.2% per annum 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Carlsberg Brewery Malaysia Berhad has lifted its dividend by approximately 3.5% 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.

To Sum It Up

Is Carlsberg Brewery Malaysia Berhad worth buying for its dividend? Carlsberg Brewery Malaysia Berhad is paying out a reasonable percentage of its income and an uncomfortably high 93% of its cash flow as dividends. At least earnings per share have been growing steadily. Bottom line: Carlsberg Brewery Malaysia Berhad has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

So if you're still interested in Carlsberg Brewery Malaysia Berhad despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 1 warning sign for Carlsberg Brewery Malaysia Berhad and you should be aware of it before buying any shares.

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.