Interested In SHL Consolidated Bhd's (KLSE:SHL) Upcoming RM00.12 Dividend? You Have Four Days Left

Readers hoping to buy SHL Consolidated Bhd. (KLSE:SHL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, SHL Consolidated Bhd investors that purchase the stock on or after the 7th of October will not receive the dividend, which will be paid on the 22nd of October.

The company's next dividend payment will be RM00.12 per share, on the back of last year when the company paid a total of RM0.12 to shareholders. Looking at the last 12 months of distributions, SHL Consolidated Bhd has a trailing yield of approximately 4.9% on its current stock price of RM02.45. 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 SHL Consolidated Bhd 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. Its dividend payout ratio is 81% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. It could become a concern if earnings started to decline. 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. Thankfully its dividend payments took up just 43% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that SHL Consolidated Bhd'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 SHL Consolidated Bhd

Click here to see how much of its profit SHL Consolidated Bhd paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that SHL Consolidated Bhd's earnings are down 3.1% a year over the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. SHL Consolidated Bhd's dividend payments per share have declined at 4.5% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.

Final Takeaway

Has SHL Consolidated Bhd got what it takes to maintain its dividend payments? 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. All things considered, we are not particularly enthused about SHL Consolidated Bhd from a dividend perspective.

With that being said, if dividends aren't your biggest concern with SHL Consolidated Bhd, you should know about the other risks facing this business. For example - SHL Consolidated Bhd has 1 warning sign we think you should be aware of.

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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.