Is It Worth Considering Carlsberg Brewery Malaysia Berhad (KLSE:CARLSBG) For Its Upcoming Dividend?

Readers hoping to buy Carlsberg Brewery Malaysia Berhad (KLSE:CARLSBG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least 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 11th of September in order to receive the dividend, which the company will pay on the 10th of October.

The company's next dividend payment will be RM00.20 per share, and in the last 12 months, the company paid a total of RM1.00 per share. Last year's total dividend payments show that Carlsberg Brewery Malaysia Berhad has a trailing yield of 5.9% on the current share price of RM016.88. 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. So we need to check whether the dividend payments are covered, and if earnings are growing.

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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 89% 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 68% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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. 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 3.5% per annum over the last five years. A payout ratio of 89% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Carlsberg Brewery Malaysia Berhad has increased its dividend at approximately 5.1% 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

From a dividend perspective, should investors buy or avoid Carlsberg Brewery Malaysia Berhad? 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. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

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 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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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.