Hexza Corporation Berhad (KLSE:HEXZA) Will Pay A RM0.075 Dividend In Four Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Hexza Corporation Berhad (KLSE:HEXZA) is about to trade ex-dividend in the next 4 days. If you purchase the stock on or after the 2nd of December, you won't be eligible to receive this dividend, when it is paid on the 18th of December.

Hexza Corporation Berhad's next dividend payment will be RM0.075 per share, which looks like a nice increase on last year, when the company distributed a total of RM0.05 to shareholders. If you buy this business for its dividend, you should have an idea of whether Hexza Corporation Berhad's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Hexza Corporation Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Hexza Corporation Berhad paid out 65% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 34% of the free cash flow it generated, which is a comfortable payout ratio.

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 Hexza Corporation Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're not enthused to see that Hexza Corporation Berhad's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Hexza Corporation Berhad has delivered 3.6% dividend growth per year on average over the past 10 years.

Final Takeaway

Should investors buy Hexza Corporation Berhad for the upcoming dividend? It's unfortunate that earnings per share have not grown, and we'd note that Hexza Corporation Berhad is paying out lower percentage of its cashflow than its profit, but overall the dividend looks well covered by earnings. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Hexza Corporation Berhad's dividend merits.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that Hexza Corporation Berhad is showing 2 warning signs in our investment analysis, and 1 of those is a bit concerning...

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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