Here's What We Like About Menang Corporation (M) Berhad's (KLSE:MENANG) Upcoming Dividend

It looks like Menang Corporation (M) Berhad (KLSE:MENANG) is about to go 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 of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase Menang Corporation (M) Berhad's shares on or after the 16th of July will not receive the dividend, which will be paid on the 25th of July.

The company's next dividend payment will be RM00.02 per share. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Menang Corporation (M) Berhad can afford its dividend, and if the dividend could grow.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

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. Menang Corporation (M) Berhad paid out more than half (61%) of its earnings last year, which is a regular payout ratio for most companies. 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. Fortunately, it paid out only 31% of its free cash flow in the past year.

It's positive to see that Menang Corporation (M) 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 Menang Corporation (M) Berhad

Click here to see how much of its profit Menang Corporation (M) Berhad paid out over the last 12 months.

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Menang Corporation (M) Berhad has grown its earnings rapidly, up 32% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.

We'd also point out that Menang Corporation (M) Berhad issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

This is Menang Corporation (M) Berhad's first year of paying a regular dividend, so it doesn't have much of a history yet to compare to.

To Sum It Up

Should investors buy Menang Corporation (M) Berhad for the upcoming dividend? We like Menang Corporation (M) Berhad's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

Want to learn more about Menang Corporation (M) Berhad's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

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

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.