Here's What We Like About Sime Darby Plantation Berhad's (KLSE:SIMEPLT) Upcoming Dividend

Readers hoping to buy Sime Darby Plantation Berhad (KLSE:SIMEPLT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. 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 Sime Darby Plantation Berhad's shares before the 3rd of May to receive the dividend, which will be paid on the 20th of May.

The company's next dividend payment will be RM00.0605 per share, on the back of last year when the company paid a total of RM0.065 to shareholders. Last year's total dividend payments show that Sime Darby Plantation Berhad has a trailing yield of 2.1% on the current share price of RM04.43. 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 Sime Darby Plantation Berhad has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Sime Darby Plantation Berhad

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. Sime Darby Plantation Berhad paid out a comfortable 35% of its profit last year. A useful secondary check can be to evaluate whether Sime Darby Plantation Berhad generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (81%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's positive to see that Sime Darby Plantation Berhad's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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. It's encouraging to see Sime Darby Plantation Berhad has grown its earnings rapidly, up 25% a year for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Sime Darby Plantation Berhad has delivered an average of 4.8% per year annual increase in its dividend, based on the past six years of dividend payments. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Is Sime Darby Plantation Berhad an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Sime Darby Plantation Berhad is facing. Our analysis shows 3 warning signs for Sime Darby Plantation Berhad that we strongly recommend you have a look at before investing in the company.

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.