Dominant Enterprise Berhad (KLSE:DOMINAN) Is About To Go Ex-Dividend, And It Pays A 4.7% Yield

Dominant Enterprise Berhad (KLSE:DOMINAN) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Thus, you can purchase Dominant Enterprise Berhad's shares before the 2nd of October in order to receive the dividend, which the company will pay on the 24th of October.

The company's next dividend payment will be RM00.01 per share, and in the last 12 months, the company paid a total of RM0.04 per share. Based on the last year's worth of payments, Dominant Enterprise Berhad has a trailing yield of 4.7% on the current stock price of RM00.845. 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 investigate whether Dominant Enterprise Berhad can afford its dividend, and if the dividend could grow.

See our latest analysis for Dominant Enterprise Berhad

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. Fortunately Dominant Enterprise Berhad's payout ratio is modest, at just 38% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. What's good is that dividends were well covered by free cash flow, with the company paying out 12% of its cash flow last year.

It's positive to see that Dominant Enterprise Berhad'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 how much of its profit Dominant Enterprise Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Dominant Enterprise Berhad's 7.9% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Dominant Enterprise Berhad has increased its dividend at approximately 1.9% a year on average.

To Sum It Up

Is Dominant Enterprise Berhad worth buying for its dividend? Dominant Enterprise 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. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

In light of that, while Dominant Enterprise Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Dominant Enterprise Berhad that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.