Why You Might Be Interested In BP Plastics Holding Bhd. (KLSE:BPPLAS) For Its Upcoming Dividend

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 BP Plastics Holding Bhd. (KLSE:BPPLAS) is about to go ex-dividend in just three 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 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. In other words, investors can purchase BP Plastics Holding Bhd's shares before the 21st of September in order to be eligible for the dividend, which will be paid on the 12th of October.

The company's next dividend payment will be RM0.015 per share. Last year, in total, the company distributed RM0.055 to shareholders. Looking at the last 12 months of distributions, BP Plastics Holding Bhd has a trailing yield of approximately 4.3% on its current stock price of MYR1.27. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for BP Plastics Holding Bhd

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. BP Plastics Holding Bhd is paying out an acceptable 53% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether BP Plastics Holding Bhd generated enough free cash flow to afford its dividend. Fortunately, it paid out only 29% of its free cash flow in the past year.

It's positive to see that BP Plastics Holding Bhd's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, BP Plastics Holding Bhd's earnings per share have been growing at 18% a year for the past five years. BP Plastics Holding Bhd has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, BP Plastics Holding Bhd has lifted its dividend by approximately 7.5% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is BP Plastics Holding Bhd worth buying for its dividend? We like BP Plastics Holding Bhd's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. There's a lot to like about BP Plastics Holding Bhd, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 2 warning signs for BP Plastics Holding Bhd you should be aware of.

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.