There's A Lot To Like About KPJ Healthcare Berhad's (KLSE:KPJ) Upcoming RM00.0115 Dividend

KPJ Healthcare Berhad (KLSE:KPJ) stock is about to trade ex-dividend in 4 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order 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 KPJ Healthcare Berhad's shares before the 24th of March in order to receive the dividend, which the company will pay on the 18th of April.

The company's next dividend payment will be RM00.0115 per share, and in the last 12 months, the company paid a total of RM0.041 per share. Last year's total dividend payments show that KPJ Healthcare Berhad has a trailing yield of 1.6% on the current share price of RM02.67. If you buy this business for its dividend, you should have an idea of whether KPJ Healthcare Berhad's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for KPJ Healthcare 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. KPJ Healthcare Berhad paid out 55% 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.

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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. This is why it's a relief to see KPJ Healthcare Berhad earnings per share are up 8.9% per annum over the last five years. Decent historical earnings per share growth suggests KPJ Healthcare Berhad has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. KPJ Healthcare Berhad's dividend payments per share have declined at 3.6% per year on average over the past 10 years, which is uninspiring. KPJ Healthcare Berhad is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Is KPJ Healthcare Berhad worth buying for its dividend? Earnings per share growth has been modest and KPJ Healthcare Berhad paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. In summary, while it has some positive characteristics, we're not inclined to race out and buy KPJ Healthcare Berhad today.

Ever wonder what the future holds for KPJ Healthcare Berhad? See what the 16 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.