There's A Lot To Like About Malayan Cement Berhad's (KLSE:MCEMENT) Upcoming RM0.06 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 Malayan Cement Berhad (KLSE:MCEMENT) 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Malayan Cement Berhad's shares on or after the 1st of November will not receive the dividend, which will be paid on the 21st of November.

The company's upcoming dividend is RM0.06 a share, following on from the last 12 months, when the company distributed a total of RM0.06 per share to shareholders. Based on the last year's worth of payments, Malayan Cement Berhad has a trailing yield of 1.7% on the current stock price of MYR3.62. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Malayan Cement Berhad has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Malayan Cement 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 Malayan Cement Berhad's payout ratio is modest, at just 49% of profit.

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

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 earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Malayan Cement Berhad has grown its earnings rapidly, up 63% a year for the past five years. Malayan Cement Berhad is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Malayan Cement Berhad's dividend payments per share have declined at 17% per year on average over the past 10 years, which is uninspiring. Malayan Cement 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

Has Malayan Cement Berhad got what it takes to maintain its dividend payments? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Overall, Malayan Cement Berhad looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

On that note, you'll want to research what risks Malayan Cement Berhad is facing. For example - Malayan Cement Berhad has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.