Why You Might Be Interested In Oriental Food Industries Holdings Berhad (KLSE:OFI) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Oriental Food Industries Holdings Berhad (KLSE:OFI) is about to go ex-dividend in just 3 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Oriental Food Industries Holdings Berhad's shares before the 14th of June in order to receive the dividend, which the company will pay on the 10th 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 RM0.065 per share to shareholders. Calculating the last year's worth of payments shows that Oriental Food Industries Holdings Berhad has a trailing yield of 3.3% on the current share price of RM02.00. 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! As a result, readers should always check whether Oriental Food Industries Holdings Berhad has been able to grow its dividends, or if the dividend might be cut.

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 36% of its profit last year. 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. The good news is it paid out just 21% of its free cash flow in the 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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Oriental Food Industries Holdings Berhad has grown its earnings rapidly, up 25% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Oriental Food Industries Holdings Berhad has delivered 13% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

From a dividend perspective, should investors buy or avoid Oriental Food Industries Holdings Berhad? It's great that Oriental Food Industries Holdings Berhad 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.

On that note, you'll want to research what risks Oriental Food Industries Holdings Berhad is facing. Our analysis shows 1 warning sign for Oriental Food Industries Holdings Berhad and you should be aware of it before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.