Here's Why We're Wary Of Buying Pacific & Orient Berhad's (KLSE:P&O) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Pacific & Orient Berhad (KLSE:P&O) is about to trade ex-dividend in the next four days. If you purchase the stock on or after the 30th of December, you won't be eligible to receive this dividend, when it is paid on the 11th of January.

Pacific & Orient Berhad's next dividend payment will be RM0.012 per share. Last year, in total, the company distributed RM0.066 to shareholders. Based on the last year's worth of payments, Pacific & Orient Berhad stock has a trailing yield of around 7.6% on the current share price of MYR0.87. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Pacific & Orient 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. Pacific & Orient Berhad paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.

Click here to see how much of its profit Pacific & Orient Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Pacific & Orient Berhad reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Pacific & Orient Berhad has lifted its dividend by approximately 20% a year on average.

Get our latest analysis on Pacific & Orient Berhad's balance sheet health here.

Final Takeaway

Should investors buy Pacific & Orient Berhad for the upcoming dividend? It's hard to get past the idea of Pacific & Orient Berhad paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

So if you're still interested in Pacific & Orient Berhad despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, Pacific & Orient Berhad has 3 warning signs (and 1 which is concerning) we think you should know about.

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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