Income Investors Should Know That Hextar Global Berhad (KLSE:HEXTAR) Goes Ex-Dividend Soon

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 Hextar Global Berhad (KLSE:HEXTAR) is about to go ex-dividend in just 4 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. 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 Hextar Global Berhad's shares on or after the 15th of March, you won't be eligible to receive the dividend, when it is paid on the 3rd of April.

The company's next dividend payment will be RM0.02 per share, and in the last 12 months, the company paid a total of RM0.03 per share. Calculating the last year's worth of payments shows that Hextar Global Berhad has a trailing yield of 1.5% on the current share price of MYR2. If you buy this business for its dividend, you should have an idea of whether Hextar Global Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Hextar Global 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. Its dividend payout ratio is 78% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be concerned if earnings began to decline. 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. Thankfully its dividend payments took up just 31% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Hextar Global 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 Hextar Global Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Hextar Global Berhad, with earnings per share up 6.7% on average over the last five years. While earnings have been growing at a credible rate, the company is paying out a majority of its earnings to shareholders. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hextar Global Berhad has seen its dividend decline 13% per annum on average over the past three years, which is not great to see. Hextar Global Berhad is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Is Hextar Global Berhad worth buying for its dividend? Earnings per share growth has been modest and Hextar Global Berhad paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. Overall, it's hard to get excited about Hextar Global Berhad from a dividend perspective.

So while Hextar Global Berhad looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Hextar Global Berhad you should be aware of.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.