Fiamma Holdings Berhad (KLSE:FIAMMA) Stock Goes Ex-Dividend In Just Three Days

Fiamma Holdings Berhad (KLSE:FIAMMA) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 12th of March will not receive the dividend, which will be paid on the 5th of April.

Fiamma Holdings Berhad's next dividend payment will be RM0.018 per share, on the back of last year when the company paid a total of RM0.035 to shareholders. Based on the last year's worth of payments, Fiamma Holdings Berhad stock has a trailing yield of around 5.9% on the current share price of MYR0.59. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Fiamma Holdings 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. Fortunately Fiamma Holdings Berhad's payout ratio is modest, at just 34% of profit. 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. Luckily it paid out just 20% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Fiamma Holdings Berhad's 6.7% per annum decline in earnings in 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. Fiamma Holdings Berhad has delivered an average of 6.7% per year annual increase in its dividend, based on the past 10 years of dividend payments.

The Bottom Line

Is Fiamma Holdings Berhad worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Fiamma Holdings Berhad looks okay on this analysis, although it doesn't appear a stand-out opportunity.

In light of that, while Fiamma Holdings Berhad has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 3 warning signs for Fiamma Holdings Berhad (1 makes us a bit uncomfortable!) that you ought to be aware of before buying the shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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