Should Income Investors Look At Johor Plantations Group Berhad (KLSE:JPG) Before Its Ex-Dividend?

Johor Plantations Group Berhad (KLSE:JPG) stock is about to trade ex-dividend in three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Johor Plantations Group Berhad's shares before the 4th of December in order to receive the dividend, which the company will pay on the 23rd of December.

The company's upcoming dividend is RM00.0175 a share, following on from the last 12 months, when the company distributed a total of RM0.052 per share to shareholders. Based on the last year's worth of payments, Johor Plantations Group Berhad stock has a trailing yield of around 3.4% on the current share price of RM01.56. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is 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 53% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Johor Plantations Group Berhad generated enough free cash flow to afford its dividend. Dividends consumed 53% 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.

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 fall far enough, the company could be forced to cut its dividend. Johor Plantations Group Berhad's earnings per share have plummeted approximately 34% a year over the previous five years.

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? It's never good to see earnings per share shrinking, but at least the dividend payout ratios appear reasonable. We're aware though that if earnings continue to decline, the dividend could be at risk. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that being said, if you're still considering Johor Plantations Group Berhad as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 1 warning sign for Johor Plantations Group Berhad that we recommend you consider before investing in the business.

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.

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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.