Be Sure To Check Out Kotra Industries Berhad (KLSE:KOTRA) Before It Goes Ex-Dividend

Readers hoping to buy Kotra Industries Berhad (KLSE:KOTRA) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 8th of March to receive the dividend, which will be paid on the 18th of March.

Kotra Industries Berhad's next dividend payment will be RM0.02 per share, and in the last 12 months, the company paid a total of RM0.09 per share. Based on the last year's worth of payments, Kotra Industries Berhad has a trailing yield of 3.5% on the current stock price of MYR2.55. If you buy this business for its dividend, you should have an idea of whether Kotra Industries Berhad's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Kotra Industries 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 Kotra Industries Berhad's payout ratio is modest, at just 45% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 31% of its free cash flow in the past year.

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 Kotra Industries 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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Kotra Industries Berhad's earnings have been skyrocketing, up 78% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. 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. Kotra Industries Berhad has delivered an average of 22% per year annual increase in its dividend, based on the past four years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Kotra Industries Berhad? Kotra Industries Berhad has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. Kotra Industries Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Kotra Industries Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 2 warning signs for Kotra Industries Berhad that we recommend you consider before investing in the business.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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