Scientex Packaging (Ayer Keroh) Berhad (KLSE:SCIPACK) Pays A RM00.025 Dividend In Just Three Days

It looks like Scientex Packaging (Ayer Keroh) Berhad (KLSE:SCIPACK) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Scientex Packaging (Ayer Keroh) Berhad's shares on or after the 4th of July, you won't be eligible to receive the dividend, when it is paid on the 17th of July.

The company's next dividend payment will be RM00.025 per share. Last year, in total, the company distributed RM0.05 to shareholders. Last year's total dividend payments show that Scientex Packaging (Ayer Keroh) Berhad has a trailing yield of 2.4% on the current share price of RM02.08. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for Scientex Packaging (Ayer Keroh) 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. Scientex Packaging (Ayer Keroh) Berhad paid out more than half (68%) of its earnings last year, which is a regular payout ratio for most companies. 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. What's good is that dividends were well covered by free cash flow, with the company paying out 19% of its cash flow last year.

It's positive to see that Scientex Packaging (Ayer Keroh) 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 Scientex Packaging (Ayer Keroh) Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 Scientex Packaging (Ayer Keroh) Berhad's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Scientex Packaging (Ayer Keroh) Berhad also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. Trying to grow the dividend while issuing large amounts of new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Scientex Packaging (Ayer Keroh) Berhad's dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Is Scientex Packaging (Ayer Keroh) Berhad worth buying for its dividend? We're not enthused by the flat earnings per share, although at least the company's payout ratio is within reasonable bounds. Additionally, it paid out a lower percentage of its free cash flow, so at least it generated more cash than it spent on dividends. In summary, it's hard to get excited about Scientex Packaging (Ayer Keroh) Berhad from a dividend perspective.

However if you're still interested in Scientex Packaging (Ayer Keroh) Berhad as a potential investment, you should definitely consider some of the risks involved with Scientex Packaging (Ayer Keroh) Berhad. Our analysis shows 3 warning signs for Scientex Packaging (Ayer Keroh) Berhad that we strongly recommend you have a look at before investing in the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com