It looks like IOI Properties Group Berhad (KLSE:IOIPG) is about to go ex-dividend in the next 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase IOI Properties Group Berhad's shares on or after the 13th of September, you won't be eligible to receive the dividend, when it is paid on the 24th of September.
The company's next dividend payment will be RM0.02 per share, and in the last 12 months, the company paid a total of RM0.02 per share. Last year's total dividend payments show that IOI Properties Group Berhad has a trailing yield of 1.5% on the current share price of MYR1.32. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
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. IOI Properties Group Berhad is paying out just 17% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether IOI Properties Group Berhad generated enough free cash flow to afford its dividend. Luckily it paid out just 9.2% of its free cash flow last year.
It's positive to see that IOI Properties Group 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.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see IOI Properties Group Berhad's earnings per share have dropped 15% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. IOI Properties Group Berhad's dividend payments per share have declined at 18% per year on average over the past seven 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.
To Sum It Up
From a dividend perspective, should investors buy or avoid IOI Properties Group Berhad? IOI Properties Group 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. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of IOI Properties Group Berhad's dividend merits.
While it's tempting to invest in IOI Properties Group Berhad for the dividends alone, you should always be mindful of the risks involved. To help with this, we've discovered 2 warning signs for IOI Properties Group Berhad (1 is a bit unpleasant!) that you ought to be aware of before buying the shares.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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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.
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