Readers hoping to buy Ann Joo Resources Berhad (KLSE:ANNJOO) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Ann Joo Resources Berhad's shares on or after the 14th of September, you won't be eligible to receive the dividend, when it is paid on the 14th of October.
The upcoming dividend for Ann Joo Resources Berhad is RM0.06 per share, increased from last year's total dividends per share of RM0.013. If you buy this business for its dividend, you should have an idea of whether Ann Joo Resources Berhad's dividend is reliable and sustainable. As a result, readers should always check whether Ann Joo Resources Berhad has been able to grow its dividends, or if the dividend might be cut.
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. That's why it's good to see Ann Joo Resources Berhad paying out a modest 27% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 2.4% of its free cash flow as dividends last year, which is conservatively low.
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.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Ann Joo Resources Berhad's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 38% a year over the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Ann Joo Resources Berhad has seen its dividend decline 6.7% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
To Sum It Up
Is Ann Joo Resources Berhad worth buying for its dividend? Ann Joo Resources Berhad has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. All things considered, we are not particularly enthused about Ann Joo Resources Berhad from a dividend perspective.
So while Ann Joo Resources Berhad looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 4 warning signs for Ann Joo Resources Berhad (2 are a bit unpleasant!) that you ought to be aware of before buying the shares.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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. 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.
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