Stock Analysis

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

Source: Shutterstock

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that KPJ Healthcare Berhad (KLSE:KPJ) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a 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. Accordingly, KPJ Healthcare Berhad investors that purchase the stock on or after the 20th of March will not receive the dividend, which will be paid on the 14th of April.

The company's next dividend payment will be RM0.006 per share, on the back of last year when the company paid a total of RM0.02 to shareholders. Last year's total dividend payments show that KPJ Healthcare Berhad has a trailing yield of 3.6% on the current share price of MYR1.11. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether KPJ Healthcare Berhad has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for KPJ Healthcare 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. KPJ Healthcare Berhad paid out 50% of its earnings to investors last year, a normal payout level for most businesses. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.

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:KPJ Historic Dividend March 15th 2023

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that KPJ Healthcare Berhad's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, KPJ Healthcare Berhad has lifted its dividend by approximately 7.6% a year on average.

Final Takeaway

Is KPJ Healthcare Berhad worth buying for its dividend? Earnings per share have been flat and KPJ Healthcare Berhad's dividend payouts are within reasonable limits; without a sharp decline in earnings we feel that the dividend is likely somewhat sustainable. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

On that note, you'll want to research what risks KPJ Healthcare Berhad is facing. To that end, you should learn about the 2 warning signs we've spotted with KPJ Healthcare Berhad (including 1 which makes us a bit uncomfortable).

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.

Valuation is complex, but we're helping make it simple.

Find out whether KPJ Healthcare Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis