Innoprise Plantations Berhad (KLSE:INNO) Passed Our Checks, And It's About To Pay A RM0.04 Dividend

It looks like Innoprise Plantations Berhad (KLSE:INNO) is about to go ex-dividend in the next two days. Investors can purchase shares before the 10th of March in order to be eligible for this dividend, which will be paid on the 26th of March.

Innoprise Plantations Berhad's upcoming dividend is RM0.04 a share, following on from the last 12 months, when the company distributed a total of RM0.05 per share to shareholders. Looking at the last 12 months of distributions, Innoprise Plantations Berhad has a trailing yield of approximately 7.0% on its current stock price of MYR1.15. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Innoprise Plantations Berhad can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Innoprise Plantations 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 84% 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. 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. Thankfully its dividend payments took up just 38% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Innoprise Plantations 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 how much of its profit Innoprise Plantations Berhad paid out over the last 12 months.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Innoprise Plantations Berhad earnings per share are up 9.4% per annum over the last five years. Decent historical earnings per share growth suggests Innoprise Plantations Berhad has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Innoprise Plantations Berhad has delivered 41% dividend growth per year on average over the past four years. 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 Innoprise Plantations Berhad an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest and Innoprise Plantations Berhad paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. In summary, while it has some positive characteristics, we're not inclined to race out and buy Innoprise Plantations Berhad today.

On that note, you'll want to research what risks Innoprise Plantations Berhad is facing. We've identified 2 warning signs with Innoprise Plantations Berhad (at least 1 which is concerning), and understanding them should be part of your investment process.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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