Be Sure To Check Out Crescendo Corporation Berhad (KLSE:CRESNDO) Before It Goes Ex-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 Crescendo Corporation Berhad (KLSE:CRESNDO) is about to go ex-dividend in just 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 as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Crescendo Corporation Berhad's shares on or after the 15th of October, you won't be eligible to receive the dividend, when it is paid on the 11th of November.

The company's upcoming dividend is RM00.0099 a share, following on from the last 12 months, when the company distributed a total of RM0.017 per share to shareholders. Based on the last year's worth of payments, Crescendo Corporation Berhad stock has a trailing yield of around 1.1% on the current share price of RM01.50. 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.

Check out our latest analysis for Crescendo Corporation Berhad

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Crescendo Corporation Berhad has a low and conservative payout ratio of just 3.0% of its income after tax. 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. Luckily it paid out just 11% of its free cash flow last year.

It's positive to see that Crescendo Corporation 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 Crescendo Corporation 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. It's encouraging to see Crescendo Corporation Berhad has grown its earnings rapidly, up 69% a year for the past five years. Crescendo Corporation Berhad looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Crescendo Corporation Berhad has seen its dividend decline 11% per annum on average over the past 10 years, which is not great to see. Crescendo Corporation 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 Crescendo Corporation Berhad got what it takes to maintain its dividend payments? It's great that Crescendo Corporation Berhad is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Crescendo Corporation Berhad, and we would prioritise taking a closer look at it.

While it's tempting to invest in Crescendo Corporation Berhad for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Crescendo Corporation Berhad that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.