It Might Not Be A Great Idea To Buy Sunsuria Berhad (KLSE:SUNSURIA) For Its Next Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Sunsuria Berhad (KLSE:SUNSURIA) is about to trade ex-dividend in the next three days. You will need to purchase shares before the 12th of March to receive the dividend, which will be paid on the 31st of March.

The upcoming dividend for Sunsuria Berhad will put a total of RM0.02 per share in shareholders' pockets. 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 check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Sunsuria 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. Sunsuria Berhad paid out more than half (71%) of its earnings last year, which is a regular payout ratio for most companies.

Click here to see how much of its profit Sunsuria Berhad paid out over the last 12 months.

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 Sunsuria Berhad's 22% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Sunsuria Berhad also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.

This is Sunsuria Berhad's first year of paying a dividend, so it doesn't have much of a history yet to compare to.

To Sum It Up

Has Sunsuria Berhad got what it takes to maintain its dividend payments? We're not overly enthused to see Sunsuria Berhad's earnings in retreat at the same time as the company is paying out more than half of its earnings as dividends to shareholders. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.

With that being said, if dividends aren't your biggest concern with Sunsuria Berhad, you should know about the other risks facing this business. To help with this, we've discovered 2 warning signs for Sunsuria Berhad that you should be aware of before investing in their 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. 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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