Four Days Left Until Malayan Flour Mills Berhad (KLSE:MFLOUR) Trades Ex-Dividend

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 one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Accordingly, Malayan Flour Mills Berhad investors that purchase the stock on or after the 11th of September will not receive the dividend, which will be paid on the 27th 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 stock has a trailing yield of around 4.1% on the current share price of RM00.725. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Malayan Flour Mills 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 81% 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. We'd be concerned if earnings began to decline. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 14% of its cash flow last year.

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.

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 that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Malayan Flour Mills Berhad's flat earnings over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. A payout ratio of 81% looks like a tacit signal from management that reinvestment opportunities in the business are low. In line with limited earnings growth in recent years, this is not the most appealing combination.

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 6.7% per year on average over the past 10 years, which is uninspiring.

To Sum It Up

Is Malayan Flour Mills Berhad worth buying for its dividend? It's unfortunate that earnings per share have not grown, and we'd note that Malayan Flour Mills Berhad is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

On that note, you'll want to research what risks Malayan Flour Mills Berhad is facing. For example, we've found 4 warning signs for Malayan Flour Mills 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.