Why You Might Be Interested In Kim Loong Resources Berhad (KLSE:KMLOONG) For Its Upcoming Dividend

Kim Loong Resources Berhad (KLSE:KMLOONG) stock is about to trade ex-dividend in three days. The ex-dividend date is one business day 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. In other words, investors can purchase Kim Loong Resources Berhad's shares before the 25th of October in order to be eligible for the dividend, which will be paid on the 15th of November.

The company's next dividend payment will be RM0.05 per share, on the back of last year when the company paid a total of RM0.14 to shareholders. Based on the last year's worth of payments, Kim Loong Resources Berhad stock has a trailing yield of around 7.9% on the current share price of MYR1.78. If you buy this business for its dividend, you should have an idea of whether Kim Loong Resources Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Kim Loong Resources Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kim Loong Resources Berhad is paying out an acceptable 60% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Kim Loong Resources Berhad generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Kim Loong Resources 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 the company's payout ratio, plus analyst estimates of its future dividends.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Kim Loong Resources Berhad's earnings per share have been growing at 17% a year for the past five years. Kim Loong Resources Berhad is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Kim Loong Resources Berhad has lifted its dividend by approximately 10% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is Kim Loong Resources Berhad an attractive dividend stock, or better left on the shelf? We like Kim Loong Resources Berhad's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Overall we think this is an attractive combination and worthy of further research.

In light of that, while Kim Loong Resources Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Kim Loong Resources Berhad is showing 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.