Income Investors Should Know That Kotra Industries Berhad (KLSE:KOTRA) Goes Ex-Dividend Soon

Kotra Industries Berhad (KLSE:KOTRA) is about to trade ex-dividend in the next four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. Meaning, you will need to purchase Kotra Industries Berhad's shares before the 2nd of October to receive the dividend, which will be paid on the 12th of October.

The company's upcoming dividend is RM0.15 a share, following on from the last 12 months, when the company distributed a total of RM0.26 per share to shareholders. Looking at the last 12 months of distributions, Kotra Industries Berhad has a trailing yield of approximately 4.6% on its current stock price of MYR5.51. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Kotra Industries Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Kotra Industries Berhad paid out more than half (58%) of its earnings last year, which is a regular payout ratio for most companies. 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. The company paid out 96% of its free cash flow over the last year, which we think is outside the ideal range for most businesses. Cash flows are usually much more volatile than earnings, so this could be a temporary effect - but we'd generally want to look more closely here.

While Kotra Industries Berhad's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to Kotra Industries Berhad's ability to maintain its dividend.

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. That's why it's comforting to see Kotra Industries Berhad's earnings have been skyrocketing, up 30% per annum for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, Kotra Industries Berhad has lifted its dividend by approximately 30% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Is Kotra Industries Berhad an attractive dividend stock, or better left on the shelf? Earnings per share growth is a positive, and the company's payout ratio looks normal. However, we note Kotra Industries Berhad paid out a much higher percentage of its free cash flow, which makes us uncomfortable. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

If you want to look further into Kotra Industries Berhad, it's worth knowing the risks this business faces. To help with this, we've discovered 2 warning signs for Kotra Industries Berhad (1 is significant!) that you ought to be aware of before buying the shares.

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.

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

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.