Interested In InNature Berhad's (KLSE:INNATURE) Upcoming RM0.01 Dividend? You Have Three Days Left

Readers hoping to buy InNature Berhad (KLSE:INNATURE) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 24th of December will not receive this dividend, which will be paid on the 15th of January.

The upcoming dividend for InNature Berhad will put a total of RM0.01 per share in shareholders' pockets. If you buy this business for its dividend, you should have an idea of whether InNature Berhad's dividend is reliable and sustainable. So we need to investigate whether InNature Berhad can afford its dividend, and if the dividend could grow.

See our latest analysis for InNature Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see InNature Berhad paying out a modest 30% of its earnings. 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. It paid out 10% of its free cash flow as dividends last year, which is conservatively low.

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 InNature 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. InNature Berhad's earnings per share have fallen at approximately 16% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

We'd also point out that InNature Berhad issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

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

Final Takeaway

Is InNature Berhad an attractive dividend stock, or better left on the shelf? 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. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

While it's tempting to invest in InNature Berhad for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for InNature Berhad and you should be aware of these before buying any shares.

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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