Four Days Left To Buy Malayan Flour Mills Berhad (KLSE:MFLOUR) Before The Ex-Dividend Date

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Malayan Flour Mills Berhad (KLSE:MFLOUR) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Malayan Flour Mills Berhad's shares before the 10th of September in order to be eligible for the dividend, which will be paid on the 25th of September.

The company's next dividend payment will be RM00.015 per share. Last year, in total, the company distributed RM0.03 to shareholders. Based on the last year's worth of payments, Malayan Flour Mills Berhad has a trailing yield of 5.3% on the current stock price of RM00.565. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Malayan Flour Mills Berhad paid out more than half (59%) of its earnings last year, which is a regular payout ratio for most companies. 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. Luckily it paid out just 24% of its free cash flow last year.

It's positive to see that Malayan Flour Mills 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.

See our latest analysis for Malayan Flour Mills Berhad

Click here to see how much of its profit Malayan Flour Mills 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 fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Malayan Flour Mills Berhad, with earnings per share up 2.3% on average over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Malayan Flour Mills Berhad's dividend payments per share have declined at 7.4% per year on average over the past 10 years, which is uninspiring. Malayan Flour Mills Berhad is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Is Malayan Flour Mills Berhad an attractive dividend stock, or better left on the shelf? While earnings per share growth has been modest, Malayan Flour Mills Berhad's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Malayan Flour Mills Berhad's dividend merits.

In light of that, while Malayan Flour Mills Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. For example, Malayan Flour Mills Berhad has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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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.