Should Income Investors Look At Tambun Indah Land Berhad (KLSE:TAMBUN) Before Its Ex-Dividend?

Readers hoping to buy Tambun Indah Land Berhad (KLSE:TAMBUN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day 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, Tambun Indah Land Berhad investors that purchase the stock on or after the 13th of December will not receive the dividend, which will be paid on the 27th of December.

The company's next dividend payment will be RM00.03 per share, on the back of last year when the company paid a total of RM0.039 to shareholders. Based on the last year's worth of payments, Tambun Indah Land Berhad stock has a trailing yield of around 4.2% on the current share price of RM00.93. 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! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Tambun Indah Land Berhad

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Tambun Indah Land Berhad's payout ratio is modest, at just 36% of profit. A useful secondary check can be to evaluate whether Tambun Indah Land Berhad generated enough free cash flow to afford its dividend. The good news is it paid out just 24% of its free cash flow in the last year.

It's positive to see that Tambun Indah Land 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's not ideal to see Tambun Indah Land Berhad's earnings per share have been shrinking at 3.4% 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. Tambun Indah Land Berhad has seen its dividend decline 5.1% 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.

Final Takeaway

Should investors buy Tambun Indah Land Berhad for the upcoming dividend? Tambun Indah Land Berhad has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about Tambun Indah Land Berhad from a dividend perspective.

In light of that, while Tambun Indah Land Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for Tambun Indah Land Berhad that you should be aware of before investing in their shares.

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.