Only Four Days Left To Cash In On Hextar Global Berhad's (KLSE:HEXTAR) Dividend

Hextar Global Berhad (KLSE:HEXTAR) stock is about to trade ex-dividend in 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Hextar Global Berhad's shares before the 10th of December in order to be eligible for the dividend, which will be paid on the 30th of December.

The company's upcoming dividend is RM00.008 a share, following on from the last 12 months, when the company distributed a total of RM0.01 per share to shareholders. Based on the last year's worth of payments, Hextar Global Berhad has a trailing yield of 1.8% on the current stock price of RM00.885. If you buy this business for its dividend, you should have an idea of whether Hextar Global Berhad's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Hextar Global Berhad

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Hextar Global Berhad distributed an unsustainably high 126% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. 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. Over the last year it paid out 51% of its free cash flow as dividends, within the usual range for most companies.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Hextar Global Berhad fortunately did generate enough cash to fund its dividend. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, Hextar Global Berhad's earnings per share have been growing at 15% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Hextar Global Berhad has delivered 1.4% dividend growth per year on average over the past five years. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

To Sum It Up

Has Hextar Global Berhad got what it takes to maintain its dividend payments? Growing earnings per share and a normal cashflow payout ratio is an ok combination, but we're concerned that the company is paying out such a high percentage of its income as dividends. To summarise, Hextar Global Berhad looks okay on this analysis, although it doesn't appear a stand-out opportunity.

With that being said, if dividends aren't your biggest concern with Hextar Global Berhad, you should know about the other risks facing this business. Our analysis shows 1 warning sign for Hextar Global Berhad and you should be aware of it before buying any shares.

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.