Padini Holdings Berhad (KLSE:PADINI) Is About To Go Ex-Dividend, And It Pays A 3.4% Yield

It looks like Padini Holdings Berhad (KLSE:PADINI) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Padini Holdings Berhad's shares on or after the 12th of September, you won't be eligible to receive the dividend, when it is paid on the 27th of September.

The company's next dividend payment will be RM00.025 per share, and in the last 12 months, the company paid a total of RM0.11 per share. Calculating the last year's worth of payments shows that Padini Holdings Berhad has a trailing yield of 3.4% on the current share price of RM03.35. If you buy this business for its dividend, you should have an idea of whether Padini Holdings Berhad's dividend is reliable and sustainable. So we need to investigate whether Padini Holdings Berhad can afford its dividend, and if the dividend could grow.

See our latest analysis for Padini Holdings Berhad

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Padini Holdings Berhad's payout ratio is modest, at just 45% of profit. 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. 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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That explains why we're not overly excited about Padini Holdings Berhad's flat earnings over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, Padini Holdings Berhad has lifted its dividend by approximately 1.4% a year on average.

To Sum It Up

Is Padini Holdings Berhad worth buying for its dividend? Earnings per share have been flat, 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 gets cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Padini Holdings Berhad today.

While it's tempting to invest in Padini Holdings Berhad for the dividends alone, you should always be mindful of the risks involved. For example - Padini Holdings Berhad has 2 warning signs we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.