Should Income Investors Look At PPB Group Berhad (KLSE:PPB) Before Its Ex-Dividend?

PPB Group Berhad (KLSE:PPB) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, PPB Group Berhad investors that purchase the stock on or after the 12th of September will not receive the dividend, which will be paid on the 26th of September.

The company's next dividend payment will be RM00.12 per share. Last year, in total, the company distributed RM0.42 to shareholders. Looking at the last 12 months of distributions, PPB Group Berhad has a trailing yield of approximately 2.9% on its current stock price of RM014.26. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for PPB Group 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. Fortunately PPB Group Berhad's payout ratio is modest, at just 41% of profit. A useful secondary check can be to evaluate whether PPB Group Berhad generated enough free cash flow to afford its dividend. Over the last year, it paid out dividends equivalent to 209% of what it generated in free cash flow, a disturbingly high percentage. It's pretty hard to pay out more than you earn, so we wonder how PPB Group Berhad intends to continue funding this dividend, or if it could be forced to cut the payment.

PPB Group Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to PPB Group Berhad's ability to maintain its dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see PPB Group Berhad earnings per share are up 6.3% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, PPB Group Berhad has lifted its dividend by approximately 7.3% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

Should investors buy PPB Group Berhad for the upcoming dividend? PPB Group Berhad delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 209% of its cash flow over the last year, which is a mediocre outcome. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

However if you're still interested in PPB Group Berhad as a potential investment, you should definitely consider some of the risks involved with PPB Group Berhad. Every company has risks, and we've spotted 1 warning sign for PPB Group Berhad you should know about.

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.