Just Three Days Till SD Guthrie Berhad (KLSE:SDG) Will Be Trading Ex-Dividend

Readers hoping to buy SD Guthrie Berhad (KLSE:SDG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase SD Guthrie Berhad's shares before the 8th of May to receive the dividend, which will be paid on the 23rd of May.

The company's next dividend payment will be RM00.1171 per share, and in the last 12 months, the company paid a total of RM0.16 per share. Based on the last year's worth of payments, SD Guthrie Berhad has a trailing yield of 3.5% on the current stock price of RM04.65. If you buy this business for its dividend, you should have an idea of whether SD Guthrie Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Our free stock report includes 3 warning signs investors should be aware of before investing in SD Guthrie Berhad. Read for free now.

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. SD Guthrie Berhad paid out more than half (52%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether SD Guthrie Berhad generated enough free cash flow to afford its dividend. Over the past year it paid out 176% of its free cash flow as dividends, which is uncomfortably 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.

SD Guthrie 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 SD Guthrie Berhad to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

See our latest analysis for SD Guthrie Berhad

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. That's why it's comforting to see SD Guthrie Berhad's earnings have been skyrocketing, up 78% 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, SD Guthrie Berhad has lifted its dividend by approximately 13% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Has SD Guthrie Berhad got what it takes to maintain its dividend payments? It's good to see that earnings per share are growing and that the company's payout ratio is within a normal range for most businesses. However we're somewhat concerned that it paid out 176% of its cashflow, which is uncomfortably high. 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.

With that being said, if dividends aren't your biggest concern with SD Guthrie Berhad, you should know about the other risks facing this business. Every company has risks, and we've spotted 3 warning signs for SD Guthrie Berhad (of which 1 doesn't sit too well with us!) 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.