Just Four Days Till LBI Capital Berhad (KLSE:LBICAP) Will Be Trading Ex-Dividend

LBI Capital Berhad (KLSE:LBICAP) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, LBI Capital Berhad investors that purchase the stock on or after the 9th of December will not receive the dividend, which will be paid on the 23rd of December.

The company's next dividend payment will be RM00.025 per share, on the back of last year when the company paid a total of RM0.025 to shareholders. Looking at the last 12 months of distributions, LBI Capital Berhad has a trailing yield of approximately 5.1% on its current stock price of RM00.49. 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 investigate whether LBI Capital Berhad can afford its dividend, and if the dividend could grow.

Check out our latest analysis for LBI Capital 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. LBI Capital Berhad paid out more than half (67%) 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. It distributed 33% 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.

Click here to see how much of its profit LBI Capital Berhad paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see LBI Capital Berhad's earnings per share have been shrinking at 4.5% a year over the previous five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. LBI Capital Berhad has seen its dividend decline 5.0% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

Is LBI Capital Berhad an attractive dividend stock, or better left on the shelf? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy LBI Capital Berhad today.

If you're not too concerned about LBI Capital Berhad's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, we've found 5 warning signs for LBI Capital Berhad (1 is potentially serious!) that deserve your attention before investing in the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.