Read This Before Considering Johor Plantations Group Berhad (KLSE:JPG) For Its Upcoming RM00.0125 Dividend

Johor Plantations Group Berhad (KLSE:JPG) stock is about to trade ex-dividend in 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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. Thus, you can purchase Johor Plantations Group Berhad's shares before the 29th of August in order to receive the dividend, which the company will pay on the 22nd of September.

The company's next dividend payment will be RM00.0125 per share, on the back of last year when the company paid a total of RM0.052 to shareholders. Based on the last year's worth of payments, Johor Plantations Group Berhad stock has a trailing yield of around 3.9% on the current share price of RM01.36. If you buy this business for its dividend, you should have an idea of whether Johor Plantations Group 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 from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Johor Plantations Group Berhad paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 49% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Johor Plantations Group 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.

Check out our latest analysis for Johor Plantations Group Berhad

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Johor Plantations Group Berhad's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 35% a year over the past five years.

Johor Plantations Group Berhad also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Given that Johor Plantations Group Berhad has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Is Johor Plantations Group Berhad worth buying for its dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Johor Plantations Group Berhad's dividend merits.

With that being said, if dividends aren't your biggest concern with Johor Plantations Group Berhad, you should know about the other risks facing this business. For example - Johor Plantations Group Berhad has 1 warning sign we think you should be aware of.

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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.