Three Days Left To Buy PPB Group Berhad (KLSE:PPB) Before The Ex-Dividend Date

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 PPB Group Berhad (KLSE:PPB) is about to go ex-dividend in just 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled 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. Thus, you can purchase PPB Group Berhad's shares before the 11th of September in order to receive the dividend, which the company will pay on the 26th of September.

The company's next dividend payment will be RM00.12 per share, on the back of last year when the company paid a total of RM0.42 to shareholders. Calculating the last year's worth of payments shows that PPB Group Berhad has a trailing yield of 4.4% on the current share price of RM09.60. 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! We need to see whether the dividend is covered by earnings and if it's growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see PPB Group Berhad paying out a modest 49% of its earnings. 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. PPB Group Berhad paid out more free cash flow than it generated - 121%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

PPB Group Berhad does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

While PPB Group Berhad's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were PPB Group Berhad to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

See our latest analysis for PPB Group Berhad

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. 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 explains why we're not overly excited about PPB Group Berhad's flat earnings over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. PPB Group Berhad has delivered an average of 8.2% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Is PPB Group Berhad worth buying for its dividend? Earnings per share have been effectively flat over this time, and PPB Group Berhad's paying out less than half its profits and 121% of its cash flow. Only rarely do we find companies paying out a low percentage of their profits yet a high percentage of their cash flow, so we'd mark this as a concern. In summary, while it has some positive characteristics, we're not inclined to race out and buy PPB Group Berhad today.

If you're not too concerned about PPB Group Berhad's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 1 warning sign for PPB Group Berhad that we recommend you consider before investing in the business.

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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.