Bonia Corporation Berhad (KLSE:BONIA) Looks Interesting, And It's About To Pay A Dividend

Bonia Corporation Berhad (KLSE:BONIA) stock is about to trade ex-dividend in three days. 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Bonia Corporation Berhad's shares before the 12th of September in order to be eligible for the dividend, which will be paid on the 27th of September.

The company's next dividend payment will be RM00.02 per share. Last year, in total, the company distributed RM0.12 to shareholders. Looking at the last 12 months of distributions, Bonia Corporation Berhad has a trailing yield of approximately 5.1% on its current stock price of RM01.56. If you buy this business for its dividend, you should have an idea of whether Bonia Corporation Berhad's dividend is reliable and sustainable. So we need to investigate whether Bonia Corporation Berhad can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Bonia Corporation Berhad

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. Bonia Corporation Berhad paid out a comfortable 48% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Fortunately, it paid out only 27% of its free cash flow in the past year.

It's positive to see that Bonia Corporation 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 Bonia Corporation 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. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Bonia Corporation Berhad's earnings per share have risen 13% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Bonia Corporation Berhad has increased its dividend at approximately 4.8% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Bonia Corporation Berhad is keeping back more of its profits to grow the business.

Final Takeaway

From a dividend perspective, should investors buy or avoid Bonia Corporation Berhad? It's great that Bonia Corporation Berhad is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Bonia Corporation Berhad looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Bonia Corporation Berhad is facing. Every company has risks, and we've spotted 3 warning signs for Bonia Corporation Berhad you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.