Why You Might Be Interested In Oriental Interest Berhad (KLSE:OIB) For Its Upcoming Dividend

Oriental Interest Berhad (KLSE:OIB) is about to trade ex-dividend in the next 2 days. You can purchase shares before the 16th of December in order to receive the dividend, which the company will pay on the 31st of December.

Oriental Interest Berhad's upcoming dividend is RM0.08 a share, following on from the last 12 months, when the company distributed a total of RM0.08 per share to shareholders. Last year's total dividend payments show that Oriental Interest Berhad has a trailing yield of 4.0% on the current share price of MYR2. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Oriental Interest Berhad

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Oriental Interest Berhad paid out a comfortable 29% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Oriental Interest 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 how much of its profit Oriental Interest 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. 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 encouraged by the steady growth at Oriental Interest Berhad, with earnings per share up 4.6% on average over the last five years. Recent earnings growth has been limited. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Oriental Interest Berhad has delivered 2.5% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Is Oriental Interest Berhad worth buying for its dividend? Earnings per share have been growing moderately, and Oriental Interest Berhad is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Oriental Interest Berhad is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Oriental Interest Berhad, and we would prioritise taking a closer look at it.

In light of that, while Oriental Interest Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for Oriental Interest Berhad that we strongly recommend you have a look at before investing in the company.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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