Interested In Dutch Lady Milk Industries Berhad's (KLSE:DLADY) Upcoming RM00.25 Dividend? You Have Three Days Left

It looks like Dutch Lady Milk Industries Berhad (KLSE:DLADY) is about to go ex-dividend in the next three days. The ex-dividend date generally occurs two days 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Dutch Lady Milk Industries Berhad's shares on or after the 27th of November will not receive the dividend, which will be paid on the 10th of December.

The company's next dividend payment will be RM00.25 per share, and in the last 12 months, the company paid a total of RM0.50 per share. Based on the last year's worth of payments, Dutch Lady Milk Industries Berhad stock has a trailing yield of around 1.8% on the current share price of RM028.50. If you buy this business for its dividend, you should have an idea of whether Dutch Lady Milk Industries Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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. Fortunately Dutch Lady Milk Industries Berhad's payout ratio is modest, at just 29% of profit. 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. It paid out an unsustainably high 237% of its free cash flow as dividends over the past 12 months, which is worrying. It's pretty hard to pay out more than you earn, so we wonder how Dutch Lady Milk Industries Berhad intends to continue funding this dividend, or if it could be forced to cut the payment.

While Dutch Lady Milk Industries 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. Were this to happen repeatedly, this would be a risk to Dutch Lady Milk Industries Berhad's ability to maintain its dividend.

Check out our latest analysis for Dutch Lady Milk Industries Berhad

Click here to see how much of its profit Dutch Lady Milk Industries Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That explains why we're not overly excited about Dutch Lady Milk Industries Berhad's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. 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. Dutch Lady Milk Industries Berhad's dividend payments per share have declined at 14% per year on average over the past 10 years, which is uninspiring.

The Bottom Line

Has Dutch Lady Milk Industries Berhad got what it takes to maintain its dividend payments? Earnings per share have barely grown in this time, and although Dutch Lady Milk Industries Berhad is paying out a low percentage of its profit, its dividend was not well covered by free cash flow. It's not common to see a company paying out a limited amount of its profits yet a substantially higher percentage of its cash flow, so we'd flag this as a concern. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Dutch Lady Milk Industries Berhad's dividend merits.

Want to learn more about Dutch Lady Milk Industries Berhad's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.