Eco World Development Group Berhad (KLSE:ECOWLD) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Eco World Development Group Berhad (KLSE:ECOWLD) is about to trade ex-dividend in the next four days. The ex-dividend date generally occurs two days 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 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. Thus, you can purchase Eco World Development Group Berhad's shares before the 7th of April in order to receive the dividend, which the company will pay on the 22nd of April.

The company's upcoming dividend is RM00.01 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 3.0% on the current share price of RM01.97. 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.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Eco World Development Group Berhad is paying out an acceptable 56% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Eco World Development Group Berhad generated enough free cash flow to afford its dividend. It distributed 28% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Eco World Development Group Berhad earnings per share are up 8.9% per annum over the last five years. Decent historical earnings per share growth suggests Eco World Development Group Berhad has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past four years, Eco World Development Group Berhad has increased its dividend at approximately 32% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Has Eco World Development Group Berhad got what it takes to maintain its dividend payments? Earnings per share growth has been modest and Eco World Development Group Berhad paid out over half of its profits and less than half of its free cash flow, although both payout ratios are within normal limits. All things considered, we are not particularly enthused about Eco World Development Group Berhad from a dividend perspective.

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. Every company has risks, and we've spotted 1 warning sign for Eco World Development Group Berhad you should know about.

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.