Carlsberg Brewery Malaysia Berhad (KLSE:CARLSBG) Pays A RM00.20 Dividend In Just Three Days

It looks like Carlsberg Brewery Malaysia Berhad (KLSE:CARLSBG) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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 Carlsberg Brewery Malaysia Berhad's shares on or after the 27th of September will not receive the dividend, which will be paid on the 17th of October.

The company's upcoming dividend is RM00.20 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 4.8% on the current stock price of RM019.50. 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! We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Carlsberg Brewery Malaysia Berhad

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. 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. A useful secondary check can be to evaluate whether Carlsberg Brewery Malaysia Berhad generated enough free cash flow to afford its dividend. Dividends consumed 74% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Carlsberg Brewery Malaysia 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Carlsberg Brewery Malaysia Berhad earnings per share are up 3.0% per annum over the last five years. A high payout ratio of 88% generally happens when a company can't find better uses for the cash. Combined with slim earnings growth in the past few years, Carlsberg Brewery Malaysia Berhad could be signalling that its future growth prospects are thin.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Carlsberg Brewery Malaysia Berhad has lifted its dividend by approximately 4.0% 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

Should investors buy Carlsberg Brewery Malaysia Berhad for the upcoming dividend? Earnings per share growth has been unremarkable, and while the company is paying out a majority of its earnings and cash flow in the form of dividends, the dividend payments don't appear excessive. All things considered, we are not particularly enthused about Carlsberg Brewery Malaysia Berhad from a dividend perspective.

However if you're still interested in Carlsberg Brewery Malaysia Berhad as a potential investment, you should definitely consider some of the risks involved with Carlsberg Brewery Malaysia Berhad. For example - Carlsberg Brewery Malaysia Berhad has 1 warning sign we think you should be aware of.

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.