Eco World Development Group Berhad (KLSE:ECOWLD) Could Be A Buy For Its Upcoming Dividend

Eco World Development Group Berhad (KLSE:ECOWLD) is about to trade ex-dividend in the next 3 days. The ex-dividend date is usually set to be two business days 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 important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Eco World Development Group Berhad's shares on or after the 10th of October will not receive the dividend, which will be paid on the 28th of October.

The company's upcoming dividend is RM00.02 a share, following on from the last 12 months, when the company distributed a total of RM0.06 per share to shareholders. Calculating the last year's worth of payments shows that Eco World Development Group Berhad has a trailing yield of 2.7% on the current share price of RM02.24. If you buy this business for its dividend, you should have an idea of whether Eco World Development Group Berhad's dividend is reliable and sustainable. So we need to investigate whether Eco World Development Group Berhad can afford its dividend, and if the dividend could grow.

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Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Eco World Development Group Berhad paid out 52% of its earnings to investors last year, a normal payout level for most businesses. 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. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Eco World Development Group 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.

Check out our latest analysis for Eco World Development Group Berhad

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Eco World Development Group Berhad's earnings per share have been growing at 14% a year for the past five years. Eco World Development Group Berhad has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last five years, Eco World Development Group Berhad has lifted its dividend by approximately 25% 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

Has Eco World Development Group Berhad got what it takes to maintain its dividend payments? Eco World Development Group Berhad's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. There's a lot to like about Eco World Development Group Berhad, and we would prioritise taking a closer look at it.

While it's tempting to invest in Eco World Development Group Berhad for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 1 warning sign for Eco World Development Group Berhad that you should be aware of before investing in their shares.

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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.