Why You Might Be Interested In MHC Plantations Bhd. (KLSE:MHC) For Its Upcoming Dividend

It looks like MHC Plantations Bhd. (KLSE:MHC) is about to go ex-dividend in the next 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. This means that investors who purchase MHC Plantations Bhd's shares on or after the 17th of April will not receive the dividend, which will be paid on the 7th of May.

The company's next dividend payment will be RM00.09 per share, on the back of last year when the company paid a total of RM0.06 to shareholders. Based on the last year's worth of payments, MHC Plantations Bhd stock has a trailing yield of around 5.6% on the current share price of RM01.08. If you buy this business for its dividend, you should have an idea of whether MHC Plantations Bhd's dividend is reliable and sustainable. So we need to investigate whether MHC Plantations Bhd can afford its dividend, and if the dividend could grow.

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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. MHC Plantations Bhd has a low and conservative payout ratio of just 21% of its income after tax. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 13% 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.

View our latest analysis for MHC Plantations Bhd

Click here to see how much of its profit MHC Plantations Bhd 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. 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's why it's comforting to see MHC Plantations Bhd's earnings have been skyrocketing, up 63% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, MHC Plantations Bhd looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, MHC Plantations Bhd has lifted its dividend by approximately 12% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Has MHC Plantations Bhd got what it takes to maintain its dividend payments? It's great that MHC Plantations Bhd is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 2 warning signs for MHC Plantations Bhd that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.