Hartalega Holdings Berhad (KLSE:HARTA) Passed Our Checks, And It's About To Pay A RM0.35 Dividend

Simply Wall St
November 12, 2021
Source: Shutterstock

Hartalega Holdings Berhad (KLSE:HARTA) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Thus, you can purchase Hartalega Holdings Berhad's shares before the 17th of November in order to receive the dividend, which the company will pay on the 2nd of December.

The company's next dividend payment will be RM0.35 per share, and in the last 12 months, the company paid a total of RM0.51 per share. Looking at the last 12 months of distributions, Hartalega Holdings Berhad has a trailing yield of approximately 8.8% on its current stock price of MYR5.78. If you buy this business for its dividend, you should have an idea of whether Hartalega Holdings Berhad's dividend is reliable and sustainable. So we need to investigate whether Hartalega Holdings Berhad can afford its dividend, and if the dividend could grow.

See our latest analysis for Hartalega 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. Hartalega Holdings Berhad paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 25% of its free cash flow in the 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.

KLSE:HARTA Historic Dividend November 12th 2021

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. 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's why it's comforting to see Hartalega Holdings Berhad's earnings have been skyrocketing, up 82% per annum for the past five years. Hartalega Holdings Berhad earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hartalega Holdings Berhad has delivered an average of 34% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Hartalega Holdings Berhad an attractive dividend stock, or better left on the shelf? Hartalega Holdings Berhad has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. There's a lot to like about Hartalega Holdings Berhad, and we would prioritise taking a closer look at it.

While it's tempting to invest in Hartalega Holdings Berhad for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for Hartalega Holdings Berhad that we strongly recommend you have a look at before investing in the company.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.