Just Three Days Till Batu Kawan Berhad (KLSE:BKAWAN) Will Be Trading Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Batu Kawan Berhad (KLSE:BKAWAN) is about to trade ex-dividend in the next three days. You can purchase shares before the 19th of February in order to receive the dividend, which the company will pay on the 4th of March.

Batu Kawan Berhad's next dividend payment will be RM0.40 per share, on the back of last year when the company paid a total of RM0.55 to shareholders. Looking at the last 12 months of distributions, Batu Kawan Berhad has a trailing yield of approximately 3.0% on its current stock price of MYR18.1. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Batu Kawan Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Batu Kawan Berhad is paying out an acceptable 52% of its profit, a common payout level among 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. Luckily it paid out just 16% of its free cash flow last 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 how much of its profit Batu Kawan Berhad paid out over the last 12 months.

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. So we're not too excited that Batu Kawan Berhad's earnings are down 2.4% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Batu Kawan Berhad has delivered an average of 2.0% per year annual increase in its dividend, based on the past 10 years of dividend payments. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.

To Sum It Up

From a dividend perspective, should investors buy or avoid Batu Kawan Berhad? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. In summary, while it has some positive characteristics, we're not inclined to race out and buy Batu Kawan Berhad today.

So if you want to do more digging on Batu Kawan Berhad, you'll find it worthwhile knowing the risks that this stock faces. To that end, you should learn about the 3 warning signs we've spotted with Batu Kawan Berhad (including 1 which doesn't sit too well with us).

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. 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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