Here's What We Like About Focus Point Holdings Berhad's (KLSE:FOCUSP) Upcoming Dividend

Readers hoping to buy Focus Point Holdings Berhad (KLSE:FOCUSP) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. This means that investors who purchase shares on or after the 9th of December will not receive the dividend, which will be paid on the 30th of December.

Focus Point Holdings Berhad's next dividend payment will be RM0.01 per share, on the back of last year when the company paid a total of RM0.02 to shareholders. Calculating the last year's worth of payments shows that Focus Point Holdings Berhad has a trailing yield of 2.5% on the current share price of MYR0.81. If you buy this business for its dividend, you should have an idea of whether Focus Point Holdings Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Focus Point Holdings 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. Fortunately Focus Point Holdings Berhad's payout ratio is modest, at just 37% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 3.5% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Focus Point Holdings Berhad has grown its earnings rapidly, up 59% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Focus Point Holdings Berhad has seen its dividend decline 1.2% per annum on average over the past 10 years, which is not great to see.

Final Takeaway

From a dividend perspective, should investors buy or avoid Focus Point Holdings Berhad? It's great that Focus Point Holdings Berhad is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Focus Point Holdings Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Focus Point Holdings Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. For example - Focus Point Holdings Berhad has 4 warning signs we think you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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