IHH Healthcare Berhad (KLSE:IHH) Goes Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see IHH Healthcare Berhad (KLSE:IHH) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day 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. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase IHH Healthcare Berhad's shares on or after the 26th of March, you won't be eligible to receive the dividend, when it is paid on the 26th of April.

The company's next dividend payment will be RM00.055 per share. Last year, in total, the company distributed RM0.07 to shareholders. Calculating the last year's worth of payments shows that IHH Healthcare Berhad has a trailing yield of 1.8% on the current share price of RM06.03. 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 IHH Healthcare Berhad has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for IHH Healthcare 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. IHH Healthcare Berhad paid out a comfortable 27% of its profit last year. A useful secondary check can be to evaluate whether IHH Healthcare Berhad generated enough free cash flow to afford its dividend. The company paid out 97% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.

IHH Healthcare Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to IHH Healthcare Berhad's ability to maintain its dividend.

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 IHH Healthcare Berhad has grown its earnings rapidly, up 39% a year 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.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, IHH Healthcare Berhad has lifted its dividend by approximately 19% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Has IHH Healthcare Berhad got what it takes to maintain its dividend payments? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. In summary, while it has some positive characteristics, we're not inclined to race out and buy IHH Healthcare Berhad today.

While it's tempting to invest in IHH Healthcare Berhad for the dividends alone, you should always be mindful of the risks involved. For example - IHH Healthcare Berhad has 1 warning sign we think you should be aware of.

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.