Be Sure To Check Out OCB Berhad (KLSE:OCB) Before It Goes Ex-Dividend

OCB Berhad (KLSE:OCB) is about to trade ex-dividend in the next 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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. Thus, you can purchase OCB Berhad's shares before the 17th of July in order to receive the dividend, which the company will pay on the 31st of July.

The company's upcoming dividend is RM00.02 a share, following on from the last 12 months, when the company distributed a total of RM0.02 per share to shareholders. Last year's total dividend payments show that OCB Berhad has a trailing yield of 2.9% on the current share price of RM00.70. If you buy this business for its dividend, you should have an idea of whether OCB Berhad's dividend is reliable and sustainable. So we need to investigate whether OCB Berhad can afford its dividend, and if the dividend could grow.

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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. OCB Berhad paid out a comfortable 28% of its profit last year. A useful secondary check can be to evaluate whether OCB Berhad generated enough free cash flow to afford its dividend. Luckily it paid out just 12% of its free 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.

See our latest analysis for OCB Berhad

Click here to see how much of its profit OCB 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. 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 OCB Berhad's earnings have been skyrocketing, up 61% per annum for the past five years. OCB Berhad is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. OCB Berhad's dividend payments are broadly unchanged compared to where they were 10 years ago.

Final Takeaway

Is OCB Berhad worth buying for its dividend? OCB Berhad has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks OCB Berhad is facing. For example - OCB Berhad has 4 warning signs we think you should be aware of.

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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.