DXN Holdings Bhd. (KLSE:DXN) Stock Goes Ex-Dividend In Just Four Days

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 DXN Holdings Bhd. (KLSE:DXN) 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, DXN Holdings Bhd investors that purchase the stock on or after the 12th of November will not receive the dividend, which will be paid on the 29th of November.

The company's next dividend payment will be RM00.008 per share, on the back of last year when the company paid a total of RM0.04 to shareholders. Based on the last year's worth of payments, DXN Holdings Bhd has a trailing yield of 7.8% on the current stock price of RM00.515. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for DXN Holdings Bhd

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. DXN Holdings Bhd paid out more than half (58%) of its earnings last year, which is a regular payout ratio for most companies. 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. Fortunately, it paid out only 46% of its free cash flow in the past 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.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at DXN Holdings Bhd, with earnings per share up 6.4% on average over the last five years. Decent historical earnings per share growth suggests DXN Holdings Bhd has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

Given that DXN Holdings Bhd has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Should investors buy DXN Holdings Bhd for the upcoming dividend? Earnings per share growth has been modest and DXN Holdings Bhd 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, it's hard to get excited about DXN Holdings Bhd from a dividend perspective.

On that note, you'll want to research what risks DXN Holdings Bhd is facing. For example, we've found 1 warning sign for DXN Holdings Bhd that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.