Read This Before Considering PT Resources Holdings Berhad (KLSE:PTRB) For Its Upcoming RM00.0099 Dividend

It looks like PT Resources Holdings Berhad (KLSE:PTRB) is about to go ex-dividend in the next four 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Resources Holdings Berhad's shares on or after the 15th of October will not receive the dividend, which will be paid on the 11th of November.

The company's upcoming dividend is RM00.0099 a share, following on from the last 12 months, when the company distributed a total of RM0.013 per share to shareholders. Calculating the last year's worth of payments shows that Resources Holdings Berhad has a trailing yield of 3.8% on the current share price of RM00.525. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Resources Holdings Berhad

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. Resources Holdings Berhad is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It paid out an unsustainably high 1,951% of its free cash flow as dividends over the past 12 months, which is worrying. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.

Resources Holdings Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Resources Holdings Berhad to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Resources Holdings 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Resources Holdings Berhad's earnings have been skyrocketing, up 21% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Given that Resources Holdings Berhad has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Has Resources Holdings Berhad got what it takes to maintain its dividend payments? We like that Resources Holdings Berhad has been successfully growing its earnings per share at a nice rate and reinvesting most of its profits in the business. However, we note the high cashflow payout ratio with some concern. All things considered, we are not particularly enthused about Resources Holdings Berhad from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, Resources Holdings Berhad has 3 warning signs (and 1 which can't be ignored) we think you should know about.

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.