Dividend Investors: Don't Be Too Quick To Buy Matrix Concepts Holdings Berhad (KLSE:MATRIX) For Its Upcoming Dividend

Matrix Concepts Holdings Berhad (KLSE:MATRIX) is about to trade ex-dividend in the next four days. You can purchase shares before the 24th of March in order to receive the dividend, which the company will pay on the 8th of April.

Matrix Concepts Holdings Berhad's next dividend payment will be RM0.03 per share. Last year, in total, the company distributed RM0.08 to shareholders. Based on the last year's worth of payments, Matrix Concepts Holdings Berhad has a trailing yield of 4.2% on the current stock price of MYR1.92. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Matrix Concepts Holdings Berhad has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Matrix Concepts Holdings Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Matrix Concepts Holdings Berhad paid out a comfortable 36% of its profit last year. A useful secondary check can be to evaluate whether Matrix Concepts Holdings Berhad generated enough free cash flow to afford its dividend. Matrix Concepts Holdings Berhad paid out more free cash flow than it generated - 129%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Matrix Concepts Holdings Berhad paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Matrix Concepts Holdings Berhad's ability to maintain its dividend.

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Matrix Concepts Holdings Berhad's 5.8% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Matrix Concepts Holdings Berhad has seen its dividend decline 5.7% per annum on average over the past eight years, which is not great to see. 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

Is Matrix Concepts Holdings Berhad an attractive dividend stock, or better left on the shelf? Matrix Concepts Holdings Berhad's earnings per share have fallen noticeably and, although it paid out less than half its profit as dividends last year, it paid out a disconcertingly high percentage of its cashflow, which is not a great combination. Bottom line: Matrix Concepts Holdings Berhad has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

So if you're still interested in Matrix Concepts Holdings Berhad despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example, we've found 1 warning sign for Matrix Concepts Holdings Berhad that we recommend you consider before investing in the business.

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. 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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