Three Days Left Until Oriental Food Industries Holdings Berhad (KLSE:OFI) Trades Ex-Dividend

Oriental Food Industries Holdings Berhad (KLSE:OFI) is about to trade ex-dividend in the next three days. You will need to purchase shares before the 12th of March to receive the dividend, which will be paid on the 7th of April.

Oriental Food Industries Holdings Berhad's upcoming dividend is RM0.005 a share, following on from the last 12 months, when the company distributed a total of RM0.015 per share to shareholders. Looking at the last 12 months of distributions, Oriental Food Industries Holdings Berhad has a trailing yield of approximately 1.8% on its current stock price of MYR0.825. 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 investigate whether Oriental Food Industries Holdings Berhad can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Oriental Food Industries Holdings Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Oriental Food Industries Holdings Berhad paid out a comfortable 35% of its profit last year. A useful secondary check can be to evaluate whether Oriental Food Industries Holdings Berhad generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 22% 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 Oriental Food Industries Holdings Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by Oriental Food Industries Holdings Berhad's 9.4% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Oriental Food Industries Holdings Berhad's dividend payments per share have declined at 9.3% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

Final Takeaway

Has Oriental Food Industries Holdings Berhad got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. All things considered, we are not particularly enthused about Oriental Food Industries Holdings Berhad from a dividend perspective.

While it's tempting to invest in Oriental Food Industries Holdings Berhad for the dividends alone, you should always be mindful of the risks involved. We've identified 3 warning signs with Oriental Food Industries Holdings Berhad (at least 1 which is potentially serious), and understanding them should be part of your investment process.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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