Here's What We Like About Hartalega Holdings Berhad's (KLSE:HARTA) Upcoming Dividend

Hartalega Holdings Berhad (KLSE:HARTA) stock is about to trade ex-dividend in 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase Hartalega Holdings Berhad's shares before the 21st of May in order to receive the dividend, which the company will pay on the 9th of June.

The company's next dividend payment will be RM0.18 per share, on the back of last year when the company paid a total of RM0.31 to shareholders. Looking at the last 12 months of distributions, Hartalega Holdings Berhad has a trailing yield of approximately 3.3% on its current stock price of MYR9.53. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Hartalega Holdings Berhad has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Hartalega Holdings Berhad

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Hartalega Holdings Berhad's payout ratio is modest, at just 46% 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. What's good is that dividends were well covered by free cash flow, with the company paying out 22% of its cash flow last year.

It's positive to see that Hartalega Holdings 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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Hartalega Holdings Berhad's earnings have been skyrocketing, up 61% per annum for the past five years. Hartalega Holdings Berhad is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. 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.

Another key way to measure a company's dividend prospects is by measuring its 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. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Should investors buy Hartalega Holdings Berhad for the upcoming dividend? Hartalega Holdings Berhad has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Hartalega Holdings Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

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.

If you're in the market for dividend stocks, we recommend checking our list of top 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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